China started publishing a new lending rate based on quotes from banks and signaled it may eventually replace the current benchmark set by the People’s Bank of China, deepening a shift to market-based interest rates.

China’s interbank funding center, under the PBOC, will calculate a weighted average “loan prime rate” each day from costs charged to the best clients by nine major lenders including Industrial & Commercial Bank of China Ltd., the Beijing-based central bank said in a statement Friday. The one-year rate is 5.71 percent Friday, compared with the PBOC-set benchmark of 6 percent.

The state-set lending rate is losing relevance after authorities in July removed the lower limit on borrowing costs, giving banks more freedom to set their own rates. The government is likely to loosen more controls in financial markets over the next year as Communist Party leaders meet in November to discuss economic reforms, a Bloomberg News survey showed this month.

“It’s a positive move in rate liberalization,” said Xu Gao, chief economist with Everbright Securities Co. in Beijing, who previously worked for the World Bank. “The new rate can be a very useful indicator for economists and analysts to measure credit demand and supply on the ground ― a good indicator that did not exist before.”

Xu said more time is needed to see whether the new rate is “truly determined by the market,” citing the daily yuan fixing that’s supposed to be based on banks’ quotes “but everyone knows it’s decided by the central bank.” (Bloomberg)