Beijing News

As China progressively introduces policies favoring a market-based currency exchange rate, it is also moving to accelerate the liberalization of interest rates, probably starting with lending rates.

In an interview with Caijing magazine, People's Bank of China Governor Zhou Xiaochuan said the government could relax controls on lending rates first.

His remarks were published on the magazine's website on Monday. Caijing said the interview took place "recently".

Zhou said the government could then liberalize deposit rates gradually by encouraging the development of alternative liability products and widening the fluctuation band for deposit rates.

China shares rebounded from a 33-month intra-day low to rise 0.2 percent gain on Wednesday, leading some analysts to hope for more gains by Friday to limit their losses during 2011.

The Shanghai Composite Index, which closed at 2,170 points, stayed in oversold conditions on the charts. It is down 22.7 percent this year, following a 14.3 percent decline in 2010.

Despite Shanghai snapping a two-day losing streak, prevailing weakness in mainland markets weighed on Hong Kong, which reopened on Wednesday after a Christmas break.

Profit growth of Chinese listed banks is likely to slow down to around 20 percent next year, according to a report released by the Bank of Communications (BOCOM), the country's fifth biggest commercial bank by asset scale.

The deceleration was mainly caused by a decline of growth in interest-earning assets, due to stable credit growth, a slowdown in foreign capital inflow and an increase in funds flowing out of the banking system, said the report.

The bank estimated that interest-earning assets of Chinese commercial banks will rise by 14 percent next year and contribute 15 percent of total net profit, compared with a 17 percent contribution in 2011.

The renminbi is coming close to having a reasonable exchange rate, Chinese Commerce Minister Chen Deming said at the G20 summit.

Chen told reporters on Thursday that the yuan has risen by about 30 percent against the US dollar since 2005, and China's trade surpluses are declining when compared with the value of its gross domestic product.

In September, selling pressure appeared for the yuan, showing that the market perception of the currency is starting to change, Chen added.

The Chinese yuan closed at a record high against the dollar on Friday. Its reference rate was set at 6.3165 on Friday, the highest it has been since July 2005.