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Zhejiang Jinzhiyi Precious Metals Trading Center Zhejiang Jinzhiyi Precious Metals Trading Center Investment Hotline Contact Zhejiang Jinzhiyi Precious Metals Trading Center Professional Order Order Zhejiang Jinzhiyi Precious Metals Trading Center Agent Zhejiang Jinzhiyi Precious Metals Trading Center Personal Agent Zhejiang Jinzhiyi Precious Metals Trading Center Company Agent Zhejiang Jinzhiyi Precious Metals Trading Center Professional Guidance Zhejiang Jinzhiyi Open an account for free at the Precious Metals Trading Center Zhou Xiaochuan wrote in the latest issue of "China Finance" magazine that China must also speed up the establishment of a deposit insurance system. The deposit insurance system is another important banking reform. This issue of the magazine was published last Friday and will be released on Tuesday.
Economists believe that the marketization of RMB interest rates is an important part of China's reform plan, which will help funds flow into households and thereby promote consumption.
However, the ruling party has been reluctant to liberalize interest rates out of concern that it might force Chinese banks to compete with each other for depositors' deposits, thereby damaging their profits.
Zhou Xiaochuan's article did not give a specific timetable for the marketization of RMB interest rates, but the article said that given that the current financial situation of banks is better, the concerns that have been hindering reform are no longer in line with the current actual situation.
Zhou Xiaochuan’s analysis in the article is consistent with recent remarks by scholar and economist Li Daokui. Li Daokui served as an adviser to China's central bank until last week. Speaking at a forum last weekend, Li Daokui called China's state-owned banks "dinosaurs" and said they were now big enough to protect themselves.
Li Daokui said that banks have very high profits and we don’t have to worry about protecting them.
Nonetheless, some analysts and bankers say the inter-bank competition brought about by the liberalization of RMB interest rates could greatly harm small and medium-sized banks, and even force some to fail.
Hu Xiaolian, deputy governor of the Central Bank of China, said at a press briefing last week that establishing a deposit insurance system is a prerequisite for the marketization of RMB interest rates because it will help the banking system maintain stability as competition intensifies.
Under the current controlled interest rate system, the rate of return on depositors' deposits has been below the rate of inflation for much of the past year.
This means that households have been losing money on their savings, thereby restricting the ruling party's efforts to expand domestic demand and make it a driver of economic growth. This financial suppression of households is cited by analysts as the main reason why Chinese consumption remains sluggish.
The marketization of RMB interest rates is also regarded as a necessary prerequisite for China to abolish capital controls and achieve two-way floating of the RMB exchange rate. In a more open system, fixed interest rates that diverge from international rates could trigger large inflows and outflows of capital.
Zhou Xiaochuan said in the article that China should also open up its financial market, enhance the two-way floating of the RMB exchange rate, gradually expand capital outflow channels, and promote the opening of capital projects. However, he did not give a specific timetable or the sequence of various reforms.