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A step in the right direction, but not enough!

China's central bank is liberalizing it's banking sector by giving lenders the autonomy to set interest rates without a benchmark lending floor. The idea behind the policy is to help reduce borrowing costs and increase liquidity. But some argue a more meaningful policy is to reduce its grip on deposit rates, which would increase competition among banks and increase yields for depositors. Moreover, loose grip on deposit rates would put a dent in the country's shadow banking.