China deregulates bank lending rates — first step towards financial system overhaul.

On Friday, China declared that it is putting an end to controls on bank lending rates in a bid to form a market-oriented financial system to back economic growth in the country.
A renovation of China’s interest rate policy is being looked as one of the most important changes needed to keep its growth compelling and durable.
At present, Banks lend money mainly to state industry in comparison to the entrepreneurs .These businesses give China’s new jobs and affluence. The experts believe that permitting banks to bargain their own rates with debtors could pass on more credit to private enterprise and organizations.
On Saturday, the central bank of China said in a statement announcing the change said, “This reform is to further develop the basic role of market allocation of resources an important measure to promote financial support for the development of the real economy,”
The removing of controls on lending rates is the first key economic reform started under the government of new President Xi Jinping. It is likely to make banks raise rates on loans. That would mean a flood of money to already cash-rich lenders, which might help in raising the low interest rates paid to savers.
House-holds in China have put money into more speculative investments in stocks and real estate helping to escalate the prices in these two sectors.