PBoC governor: Conditions "ripe" for interest rate reform

China’s central bank governor said that conditions are “basically ripe” for interest rate liberalization in China, reforms that would necessitate dramatic changes to the state-owned banking system, The Wall Street Journal reported. Zhou Xiaochuan, governor of the People’s Bank of China, wrote the comment in China Finance, a magazine backed by the central bank. While Zhou did not offer a specific plan or timeline, his comments are part of a broader call among China’s leaders for financial liberalization. Li Daokui, a former advisor to the PBoC, has said that China’s big state banks were “dinosaurs” that should now compete in an open market. Li commented that interest rates were in fact liberalizing due to the booming popularity of bank wealth management products, which pay higher interest rates than traditional bank deposits. Many economists see interest rate liberalization as a key component of further economic reform, but vested interests oppose the changes on the grounds that it could destroy many smaller and rural banks.