China lifts foreign-currency deposit rates cap at Shanghai FTZ

BEIJING: In a move to further liberalising foreign currency deposits, China's central bank said it will remove interest rate ceilings on smaller foreign-currency deposits in Shanghai Free Trade Zone from March 1 as part of long-anticipated financial reforms.

Deposits of less than USD 3 million owned by businesses and agencies registered in the zone or by individuals who have worked in the zone for more than one year will receive the same rate of interest, the Shanghai branch of the People's Bank of China said today.

Currently, regulatory caps apply to one-year or other shorter-term deposits in US dollars, Japanese yen, euros and Hong Kong dollars. Deposits worth more than USD 3 million are not subject to ceilings, state-run Xinhua news agency reported.

China has launched the Shanghai pilot free trade zone last year as a part of its new set of fiscal reforms to halt the economic slowdown and revitalise the world's second largest economy.

Billed as a "test bed" for the Chinese leadership's drive of deepening market-oriented reforms and boosting economic vigour, the FTZ in China's biggest city and trade centre was expected to pose a stiff competition to Hong Kong as an international trade and financial centre with free exchange of currencies.

As per the blueprint of reform for the FTZ which functions from an area of 29 sq km in Shanghai will have specific tasks which included easing restrictions on yuan, investment and trade to spearhead a new strategy to spur growth.

The project was stated to be next biggest economic reforms launched after the first special economic zone in Shenzhen in 1980s launched by late Chinese leader Deng Xiaoping which became major success.