China Gauges Trade-Zone Deposit Certificate Demand, Herald Says

China’s central bank gauged demand for tradable certificates of deposit among banks operating in the Shanghai free-trade zone and solicited suggestions for regulations, 21st Century Business Herald reported.

The deposits, which carry a fixed term and interest rate, are intended to be held to maturity, the newspaper said. The ability to trade the loans on the interbank market will give banks flexibility in managing cash, Australia & New Zealand Banking Group Ltd. economists wrote in September.

The People’s Bank of China held two meetings this week with financial institutions in the zone about timing, quotas, pricing and issuers, according to the newspaper, which cited an unidentified banker. One key question is whether investors outside China should be allowed to buy the certificates, according to the report.

Under a guideline published this week, the central bank plans to conduct a pilot program in the zone to allow qualified financial institutions to issue large-denomination, tradable certificates of deposit as part of its plan to liberalize interest rates. Interest-rate deregulation and yuan convertibility were among economic reforms approved by Communist Party leaders at a meeting last month.

China may allow onshore trading of CDs by the end of this year and establish a deposit insurance program in 2014, before scrapping by 2015 the limit on interest rates paid on savings, Deutsche Bank AG forecast before the meeting.

— With assistance by Jun Luo

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