Banks to Launch Sales of Negotiable Certificates of Deposit
The biggest banks in the country will be launching the sale of negotiable certificates of deposit as sources that has the knowledge of the situation said that the sale will be underlining the government’s intent in reducing the State control of interest rates. The five biggest banks in china can offer 5 billion yuan of negotiable certificates of deposit every week.
These types of investments gives the buyers a fixed interest payout and the NCD is just a step forward towards the relaxation of China’s control over the interest rates as buyers and sellers will be negotiating the purchase themselves. As interest rates are controlled by the local government that tells these banks how much they will be paying fir the deposits and how much they are allowed to lend so their profit margins will be protected,
Financial analysts are criticizing the grip over the rates saying that its distorted the Chinese economy and is also obscuring the true price of credit and is encouraging inefficient investments. furthermore to reform the economy China should allow the market forces to play a bigger role as the plans were unveiled which they are considered the boldest plans to be implemented in 30 years.
As of the moment the negotiable certificates of deposit are only sold and bought by banks in the inter banking market such as fund manager and banks.