Interest Rate Reform Continues With CD Guidelines

China c.bank issues guidelines for large certificates of deposit

China's central bank on Tuesday issued guidelines for banks to issue large-scale certificates of deposit (CDs) to individual and institutional investors, paving the way for full interest rate liberalisation.

The People's Bank of China (PBOC) said floating rates for the CDs will be based on the Shanghai Interbank Offered Rate (SHIBOR).

It has been driving the use of CDs as a way to free the flow of capital within its financial system and market-determined interest rates.

The launch of large-scale CDs will help "improve market-oriented interest rate formation mechanism and independent pricing ability of financial institutions", the central bank said.

The announcement, on the central bank's website, said that the CDs will be covered by China's deposit insurance programme.

The CDs will be subject to different minimum thresholds. Individuals need a minimum of 300,000 yuan ($48,400), while institutions will need 10 million yuan to participate, the PBOC said.

Most homeowners have enough capital to invest.