Business

Published: Monday February 6, 2012 MYT 9:06:00 AM

China should relax credit business controls exPBOC official


SHANGHAI, Feb 6 (Reuters) China needs to lower the threshhold for companies wanting to extend credit to cashstarved companies, such as allowing leasing firms to issue financial bonds and accepting largeamount fixedtime deposits, a former central banker was quoted as saying in remarks published on Monday.

Wu Xiaoling, a former deputy central bank governor, said China was not short of money but lacked proper credit allocation channels, creating an artificial short of money for firms, the official Shanghai Securities News quoted Wu as saying.

"The best way to solve this problem is to lower the threshold for companies to enter the credit market," Wu was quoted as telling a financial forum.

"For this year in particular, a measure to widen the gap for banks to lower lending rates compared with official benchmarks can also be considered."

China does not have a free interest rate system. The People's Bank of China (PBOC) sets official interest rates.

Banks are only allowed to raise desposit rates and lower loan rates strictly within the central bank's restrictions.

The government has also set restrictions for which types of companies that can conduct deposittaking and lending.

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