China to accelerate reforms

Banks now no longer have to first establish a China representative office before setting up other branches. — AFP

Beijing: China will accelerate liberalisation of interest rates and encourage a multilayered capital market as the country seeks to adapt to a ‘new normal’ of slower growth, according to an official at the central bank.

China will move ahead with deregulation of interest rates to make its financial system more competitive and more comprehensive, capable of discovering and fostering new growth engines, Pan Gongsheng, deputy governor of the People’s Bank of China, said on Saturday at a conference in Beijing.

The country also needs to build a multi-layered capital market, increasing the role of equity financing to let more companies access funds, he said.

While China’s economy is heading for its weakest full-year expansion since 1990, its leaders have called the slowdown part of a “new normal,” signalling tolerance for a lower rate of expansion as they tackle structural imbalances, corruption, pollution and debt, and push pro-market policies.

“The economic new normal places new challenges on financial reform,” Pan said in a speech. “New growth engines will rely on the market forces.”

Pan’s speech comes after some criticism that the central bank’s unexpected move last month to cut its deposit and lending rates for the first time in more than two years was a cave-in to pro-growth policies. Economists at JPMorgan Chase and Co, Barclays and UBS all said the central bank will act again to shore-up demand. The central bank will also introduce certificates of deposits to companies and individuals, Pan said. Regulators will complete a “negative list” of prohibited and restricted activities — an approach that lets companies do anything that’s not specifically banned, he said.

Existing rules revised

China has cut red-tape for foreign bank branch openings and entry into renminbi business, state media said on Saturday, the latest in a series of measures to liberalise the banking sector.

The cabinet revised existing rules on Saturday, abolishing the requirement for foreign-owned and joint-stock banks to inject 100 million yuan ($16.08 million) or an equivalent in other currencies of working capital into a newly opened branch, the official Xinhua news agency reported. This should speed up the approval process, the news agency said.

The revisions also lower the threshold for foreign banks to enter the renminbi business. The cabinet has cut the number of years a bank has to be registered before it conducts renminbi business from three to one, and scrapped a two-year profitability requirement.

Banks now no longer have to first establish a China representative office before setting up other branches.