China's central bank governor Zhou Xiaochuan said the country is looking to liberalise interest rates within two years, provided its economic circumstances at home and abroad are favourable.
"The timetable to liberalize interest rates will be mostly carried out according to conditions of the domestic economy and global economy, but we believe it could be realized within two years," Zhou told a press conference at the ongoing China-US Strategic and Economic Dialogue.
Zhou earlier said that the country is very likely to ease its grip on banks' deposit rate in the coming one or two years, Xinhua news agency reported. Easing of deposit rates is the last and most important step of interest rate liberalisation.
China has been taking a number of steps towards the liberalisation of interest rates. In July, the People's Bank of China (PBoC) announced that it would scrap the floor limit for bank lending rates.
In June, China allowed banks operating in Shanghai to set their own foreign-currency deposit rates, after testing the reform in the city's pilot free trade zone.
If the experiment becomes successful, China would roll out the programme across the country.
China is also undertaking reforms in the forex market, amid rising demand from global powers including the US.
Zhou said the central bank will "significantly cut intervention on the forex market".
Earlier in March, China widened its daily currency trading limits, as it signalled a gradual withdrawal from its regular intervention.
The yuan had appreciated by more than 12% by January after the central bank deepened reforms to the yuan's exchange rate formation mechanism back in June 2010. However, the currency headed toward months of depreciation against the US dollar after the central parity rate of the yuan hit a new high against the dollar in January.
"If the market fluctuates too much resulting from short-term opportunistic forces, we will make moves; and if the market is stable, we could speed up the reform a little bit," Zhou said.