Interest Rate Liberalization

China is set to fully liberalize its interest rate within one or two years, in a bid to further reform the financial sector, said Zhou Xiaochuan, the central bank governor, at a recent news briefing during Chinaís annual legislative session in March. ìWe will let the market play its due role in interest rate liberalization. Thatís for sure,î Zhou said. He added that interest rates will possibly go up, but will eventually level out in the longer term due to market forces and competition. Financial reforms, including yuan globalization, banking regulations, private equity, debt risks control, will be launched with zeal, although some steps may take three or five years, according to him. 

Private Banks

China will set up five private banks on a trial basis before the practice is extended to more places, said the chief of the countryís banking regulator in March. These first five banks will be in Tianjin, Shanghai, Zhejiang and Guangdong, according to Shang Fulin, Chairman of the China Banking Regulatory Commission, at a press conference during this yearís legislative session. Ten private companies, including Internet firms Alibaba and Tencent, have been selected to take part in the preparation work for setting up the banks, said Shang. He said their eligibility as shareholders will be subject to further examination. Each of the banks will be co-sponsored by at least two private capital providers, he added.  

Insurersí Bank

China will regulate the deposit procedures of insurersí banks to strengthen risk management during interest rate liberalization, according to Chinaís insurance watchdog. Insurance companies should standardize operations with bank deposits, which amount to about one third of total fundamental insurance assets, according to the statement released by China Insurance Regulatory Commission in March. The statement calls for a custody mechanism for bank deposits, regulating deposit certificate mortgage business and enhancing information disclosure. 

Creativity Industry

Plans aimed at promoting the integration of the creative and design service industries with the real economy were released by Chinaís State Council, the cabinet, in March. China will integrate creative and design service industries with other traditional sectors, including equipment manufacturing, consumer goods manufacturing, construction, information, tourism, agriculture and sport industries, it said. The proposals lay out specific measures to boost integration. Authorities will tighten intellectual property protection to promote creativity. Financial support or preferential tax policies will be provided for small and micro enterprises that feature cultural creativity or design service, said the document.  

VAT Reform

China will expand a pilot reform program to replace turnover tax with value-added tax (VAT) in an effort to reduce companiesí tax burdens and curb double taxation, an official statement said in March. The Ministry of Finance said in a statement on its website that it is currently working with other government departments on plans to expand the VAT reform to more sectors, including the telecommunications, construction, real estate, finance, catering and accommodation services. The country will steadily expand the scope of the pilot reform and strive to complete the reform by the end of the 12th Five-Year Plan (2011-15), the statement said. 

Online Shopping

Chinaís revised consumer rights law, which took effective on March 15, gives consumers a seven-day cooling-off period during which they can get a refund for online purchases. The revision to the Consumer Protection Law specifies that all purchases made online can be returned unconditionally within seven days, except four categories, which are customized products, fresh and perishable products, digital products (software and online downloadable goods), newspapers and magazines. This is the first change of the law since it was formulated 20 years ago. It regulates merchandise and service transactions through the Internet, television, telephone and postal service for the first time.

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