China loosens its leash on banks

China took another cautious step towards freeing its banks from regulation on Friday by abandoning its floor on lending rates.

The People’s Bank of China said in a statement that it would scrap the floor on lending interest rates. Chinese banks are not allowed to set lending rates below 70% of a guidance rate set by the central bank.

The PBoC said the move is designed to lower borrowing costs for individuals and smaller companies. However, some analysts said the reform would not lead to a significant or immediate change of banks’ lending practices and lending rates, because most lending rates are already higher than the interest...