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China to Scrap Benchmark as Rates Shift Toward Market-Led System

  • Banks to convert existing loans to loan prime rate reference
  • China is pushing forward interest-rate liberalization
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China to Scrap Benchmark Lending Rate
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China’s central bank ordered lenders to adopt a new loan-pricing regime for all credit from next year, marking an end to the previous benchmark and another step toward liberalizing the financial system.

Financial institutions should stop using the old lending rate as the pricing reference for all credit from January, while gradually converting existing loans to a new base -- the loan prime rate -- from March to August, the People’s Bank of China said Saturday. The one-year lending rate had provided the previous anchor for loans across the economy.