China’s New Interbank Rates

September 22, 2006 at 6:44 am (Banking, China, Economics, Finance)

This might not be a coincidence that China’s central bank announced a new interest policy when the US Treasury Secretary Henry Paulson is paying a visit to China. A flexible yuan rate, which is what Paulson aimed for, calls for a healthy, market-oriented financial market. And the Shanghai Interbank Offered Rate, or Shibor, is the latest step China is taking to cobble the entangled credit market.

China won’t leave its exchange rate fully flexible until a sustainable financial system is established. Shibor is a small step. Some are suspicious about it’s real effect, but at least China’s banking regulators are summoning up strength.

(The news was reported by the Wall Street Journal. Officials declined to comment)

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