China permits banks to set their own RMB-USD exchange rates

BEIJING: China will allow banks to set their own exchange rates for the renminbi (RMB) against the US dollar with clients, a further step in the liberalisation of RMB exchange rates.

Banks can set their RMB/dollar exchange rate in their over-the-counter deals with clients on the basis of market demand, China's State Administration of Foreign Exchange ( SAFE) said, stated to be key reform to reviltalise its financial system.

The regulation entered effect on Wednesday. Before the new move, the spreads in banks' RMB/dollar buying and selling prices were subject to regulatory controls, state run Xinhua news agency reported.

The People's Bank of China ( PBoC) widened the spreads to 3 per cent from the previous 2 per cent in March.