MNI POLICY: China Interest Rate Levels Appropriate: PBOC Yi

     BEIJING (MNI) - China's current interest rates are at appropriate levels

and the central bank will act according to the domestic situations, Yi Gang, the

governor of the People's Bank of China, in an interview with Caixin published

Tuesday.

     The purpose of lowering interest rates is mainly to deal with deflationary

risks, but China's inflation is moderate at present, as consumer price was 2.7%

in June and July, said Yi. The current interest rates are appropriate, or close

to  "golden," or comfortable, levels, Yi said. 

On the reform of the interest rate framework, Yi said the benchmark lending rate

will be replaced by a rate set by market quotes and referred to a series of

market-oriented interest rates such as that of medium-term lending facilities of

the PBOC. The benchmark deposit rate will be maintained in long term to prevent

banks from disorderly competing for deposits, Yi argued. 

     The reform will further lower lending costs to encourage big banks to

provide loans for medium and small businesses, Yi pointed out, adding the

adjustment of reserve requirement ratio framework also helps boost lending to

small companies.

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

--MNI Beijing Bureau; +86 (10) 8532 5998; email: marissa.wang@marketnews.com

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