As China progressively introduces policies favoring a market-based currency exchange rate, it is also moving to accelerate the liberalization of interest rates, probably starting with lending rates.

In an interview with Caijing magazine, Zhou Xiaochuan, Governor of the People's Bank of China, said the government needs to relax controls on lending rates first.

Zhou said the government should then liberalize deposit rates gradually by encouraging the development of alternative liability products and widening the fluctuation band for deposit rates.

He said officials are trying to reach a consensus on reforms and are waiting for an appropriate time to act.