Tang Min, ADB's chief economist in China, called for prompt action on interest rate reform, while warning of the risks of excessive competition.

"Financial reform has been the bottleneck of all reforms," he said. "When it (the interest rate liberalization scheme) proves workable in the trial, we should move quickly to spread it."

Bruce Murray, ADB's resident representative in China highlighted the importance of freeing up China's interest rates.

But he said the government should deal with other priorities, such as reducing non-performing loans, improving the performance of State-owned commercial banks and strengthening financial supervision, rather than staging a full-blown interest rate liberalization in the "next year or two."

China still largely controls its interest rates but is testing a reform package in East China's Zhejiang Province that allows more flexibility in both lending and borrowing rates.

(Edited by china.org.cn December 18, 2002)