(Bloomberg) -- People’s Bank of China Governor Yi Gang pledged additional measures to open the economy, offering more specifics that may help ease trade tensions with the U.S.
Authorities aim to introduce a Shanghai-London stock connect within the year, Yi said Wednesday on a panel discussion at the Boao Forum for Asia in Hainan province. China also will quadruple the quota for the Mainland-Hong Kong stock connect, he said, adding that banking regulation will need to be strengthened during the opening-up.
President Xi Jinping reiterated pledges to open sectors from banking to auto manufacturing in his speech Tuesday to the annual gathering of business and economic leaders. He also warned against returning to a "Cold War mentality" amid trade disputes with the U.S. counterpart Donald Trump.
On monetary policy, Yi said the interest rate differential with the U.S. is in a comfortable range and that deposit and lending rates will be more market determined. He reiterated that the central bank will continue with prudent monetary policy.
While the PBOC is expected to keep its benchmark lending rate unchanged this year, according to economists surveyed by Bloomberg, it could guide interbank interest rates higher as it seeks to contain leverage and defuse risk.
That’d keep China’s monetary policy in line with that in the U.S., reducing pressure on the value of the yuan and capital outflows, as the Federal Reserve said it plans two more interest rates hikes this year. Meanwhile, recovering global economy and robust demand may accelerate the pace of monetary policy normalization in Europe and Japan.
Yi succeeded Zhou Xiaochuan last month to became PBOC governor, sharing responsibility of directing monetary policy with Guo Shuqing, the Communist Party’s secretary at the central bank who concurrently also serves as chairman of the banking and insurance regulator.
The daily Shanghai-Hong Kong link quota will be expanded to 52 billion yuan ($8.3 billion) from 13 billion yuan starting May 1, Yi said.
He reiterated earlier pledges by leaders to ease foreign ownership limits on banks and asset management companies, and to allow foreign banks to set up branches and subsidiaries at the same time. He said he expects the policies to be implemented by June.
(Updates to add monetary policy comments from fourth paragraph.)
To contact Bloomberg News staff for this story: Yinan Zhao in Beijing at yzhao300@bloomberg.net.
To contact the editors responsible for this story: Jeffrey Black at jblack25@bloomberg.net, Jeff Kearns, Ken Wills
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