Analysts said such a market would help Chinese banks save foreign currency, but said there was no sign yet that Beijing had begun to plan its establishment. The Shanghai-based Business News said China's current foreign exchange market was imperfect without such an inter-bank foreign exchange lending market.
Chinese banks currently cannot make good use of their surplus foreign exchange or cover short-term shortages because foreign currency sums are allowed to circulate only within a bank, but not between different banks, it said.
Analysts said because of domestic restrictions, many Chinese banks and major firms put their surplus foreign exchange in banks outside China at relatively low interest rates and borrowed abroad at higher interest rates than necessary. "Losses are considerable," said one Chinese banker. "Setting up an inter-bank lending market would help save a lot foreign exchange."
Officials at the People's Bank of China, the central bank, and the State Administration for Foreign Exchange Control, declined to comment. Beijing launched a trial inter-bank lending market early this year to allow Chinese banks to lend and borrow renminbi on a short-term basis as a key step towards building market-driven financial markets in China.
China has a foreign exchange trading market, allowing banks to swap local currency for US and Hong Kong dollars and Japanese yen. But there is no formal mechanism at present for banks to lend foreign exchange funds to each other.