Chinese central bank governor Zhou Xiaochuan has come out to criticise the current near-zero interest rate environment, according to Caixin.
Chinese banks are currently able to pay depositors near-zero interest rates, which makes their cost of funds extremely low. As a result, they are under little pressure to make loans to the real economy:
“Zero interest policies have reduced the motivation of banks to serve the real economy,” said Zhou.
During the financial crisis, the United States and Japan slashed their interest rates to below one per cent. Now many criticise the financial institutions in these countries as not doing enough to help revive the real economy.
Zhou said that setting only benchmark interest rates is not enough for China’s central bank and that it needs to do more to encourage banks to support the real economy.
It sounds pretty similar to what many are criticising U.S. banks for doing.
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