China’s interest rate liberalization to hit bank profitability

Free market interest rates will hurt China’s banking sector but are inevitable.

Bank of Communications Company Vice President Qian Wenhui said interest rate liberalization will hurt banks' spreads but. . . “won't be lethal to Chinese banks.”

He noted that Chinese banks will consider many factors to adjust their strategies to make up for the lower rates.

“Wealth management is one of our major drivers,” he said.

The People's Bank of China, the central bank, last month allowed interest rates on deposits to rise to 110% of the one-year deposit benchmark of 3.25%, and lending rates to fall to 80% of the one-year benchmark of 6.31%.

This is widely seen as a step toward allowing market forces to set interest rates.