The central bank has long advocated for a price-based framework, where market-oriented interest rates, instead of central bank administrative controls, play a larger role in order to improve the efficiency of the country's macroeconomic management.
BEIJING: China will stop using the traditional benchmark lending rate for new loans starting next year, which is considered a milestone in the 25-year process of market-oriented interest rate liberalization reform. Economists expected a more flexible mechanism to reduce financing costs for companies and households.
The loan prime rate, which was introduced by the central bank in August, will become the only benchmark rate for banks' new lending as of Jan 1. Financial institutions and their clients can negotiate a floating rate higher or lower than the benchmark, according to a statement from the People's Bank of China, the central bank, on Saturday.
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