"The launch of Shibor will further push forward the market-oriented interest rate reform and develop a benchmark interest rate system for China's money market," the central bank said.

The bank is also hopeful the rate will help "improve the pricing capabilities of financial institutions and guide the pricing of money market instruments".

"The formation of a benchmark interest rate is the precondition to make the interest rate market-oriented," said Yuan Dejun, senior economist with China Galaxy Securities.

"Since the opening-up and reform of 1978, the central bank has made huge efforts to promote market-oriented interest rate reform and develop a benchmark interest rate system for China's money market," he said.

"But due to their shortcomings, current indexes cannot become real benchmark interest rates," he added.

Presently there are only two major reference rates in the market the seven-day weighted average interest rate for repurchasing treasury bonds and the rate for one-year central bank bills.

The new benchmarks provide a sound barometer for judging whether liquidity in China's money market is reasonable.

What's more, the new rates create realistic conditions for the alteration of money policy adjustment, Yuan said.

"In recent years, the money policy in our country relied on the adjustment of banks' loan scale and money supply, while giving insufficient play to tools such as the interest and exchange rates," he said.

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