Zhou Xiaochuan, governor of China's central bank, speaks at a press conference for the second session of China's 12th National People's Congress (NPC) on financial reform in Beijing, capital of China, March 11, 2014. (Xinhua)
China's central bank Governor Zhou Xiaochuan said deposit rates will be liberalized in one to two years, as the nation expands the role of markets.
The China Banking Regulatory Commission will allow a trial of five privately-owned banks, Chairman Shang Fulin said at the same press briefing in Beijing today, part of the annual meeting of the National People's Congress. Recent yuan weakness shows the greater role of market forces, Zhou said.
"Chinese government still has the time and space to deal with the risks," said Li Wei, a Shanghai-based economist for Standard Chartered Plc. "The government will roll out reforms in a gradual way."
Asked about the drop in the yuan, Zhou said that from the central bank's perspective, "we focus more on the medium-term trend, and the short-term trend doesn't necessarily represent the medium-term one." Recent movements in the yuan are "very normal and also reflect the growing role of market forces," he said.
"This is much faster than we had expected," said Dariusz Kowalczyk, a Hong Kong-based strategist at Credit Agricole CIB. At Bank of America Corp. in Hong Kong, economist Lu Ting said the pace was "broadly in line with our expectations."
Zhou reiterated interest rates will initially rise as controls are removed, while Shang said that banking risks are under control, adding that lenders have sufficient capital and provisions for non-performing loans.
The banking regulator will allow privately owned banks to be set up in the cities of Shanghai and Tianjin and in Guangdong and Zhejiang provinces, Shang said. Alibaba Group Holding Ltd. and China Wanxiang Holding Co. will apply jointly for a license, Alibaba said in an e-mailed statement.
China to pilot five private banks
Shang Fulin, president of China Banking Regulatory Commission, speaks at a press conference for the second session of China's 12th National People's Congress (NPC) on financial reform in Beijing, capital of China, March 11, 2014. (Xinhua/Wang Peng)
China will set up five private banks on a trial basis before the practice is extended to more places, the chief of the country's banking regulator said on Tuesday.
The first batch of five banks will be in Tianjin, Shanghai, Zhejiang Province and Guangdong Province, according to Shang Fulin, head of the China Banking Regulatory Commission (CBRC), at a press conference on the sidelines of the annual parliamentary session.
Ten private companies, including Internet firms Alibaba and Tencent, have been selected to take part in the preparation work for setting up the banks, said Shang.
He said their eligibility as shareholders will be subject to further examination.
Each of the banks will be co-sponsored by at least two private capital providers, he added.
Shang did not provide a timetable for the launch of the banks, saying that they will be approved when "conditions are ripe."
Setting up private banks in China was written into an ambitious reform package rolled out after a key plenum of the Communist Party of China Central Committee in November, representing further opening up of the country's banking sector.
Compared with existing commercial banks, the private banks will be subject to the same regulation and supervision, according to the CBRC chief.
But financial services of private banks will be oriented towards small and micro businesses as well as residential communities, Shang said.
Risk monitoring will be strengthened and shareholders' behaviors will be regulated, he added.
