China's central bank expanded banks' freedom to set foreign-currency deposit rates to all of Shanghai from the city's free-trade zone, a step toward easing controls across the nation.

The People's Bank of China (PBOC) will remove the cap on foreign-currency deposit rates in Shanghai effective tomorrow for what it described as small accounts, according to a statement distributed at a briefing in the city today. The trial will start with institutional accounts, and individual accounts will be added later based on “market conditions.”

The PBOC removed the cap on foreign-currency interest rates on March 1 for deposits of less than $3 million inside the trade zone, part of plans to give markets a greater role in the world's second-biggest economy. The central bank, which removed the floor on most lending rates in July 2013, will liberalize state-set deposit rates within one to two years, Governor Zhou Xiaochuan said in March.

The central bank didn't define the size of small accounts in today's statement.

China had $565.8 billion of foreign-currency deposits as of May, equivalent to about 3 percent of the 109.8 trillion yuan (US$17.6 trillion) in local-currency savings, according to central bank data.

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