Would allow market forces to determine credit
China's central bank is likely to remove the ceiling on bank deposit rates soon, instead of raising the cap again, Sheng Songcheng, head of the Statistics and Analysis Department at the People's Bank of China, was quoted on Thursday as saying.
Some analysts expect the central bank to free up deposit rates when it next cuts interest rates.
The move would mark a landmark reform toward allowing market forces to determine the cost of credit to help -rebalance the economy.
"I believe removal of the ceiling on deposit rates is not far off," Shanghai-based newspaper China Business News quoted Sheng as saying.
Sheng suggested that the authorities should do away with the cap on bank deposit rates "when the time is appropriate," saying that it would be meaningless to increase the ceiling again.
When the central bank cut interest rates in May, the third such move since November 2014, it lifted the ceiling for deposit rates to 1.5 times the benchmark.
Sheng also said cutting interest rates while cutting the banks' reserve requirement will help boost demand for credit and increase money supply, which in turn would help stabilize economic growth over the long term.
A deluge of Chinese data due next week may show some signs of steadying in the economy thanks to stimulus measures, but analysts say more support is needed to counter headwinds from a property downturn and patchy exports.
Many economists expect the central bank will cut interest rates and banks' reserve requirements again in the coming months to help support the economy.
In May, China rolled out a long-awaited deposit insurance system to protect savers in case a freed-up market leads to major turbulence for smaller banks - seen as a prerequisite for full interest rate liberation.
Letting the market set the cost of credit will help avoid the wasteful investment funded by cheap credit that has led to a massive buildup in debt, as China seeks to put the economy on a more sustainable growth path, experts said.
