With the use of interest rates buttressing the effectiveness of administrative measures, there is a greater chance of success in macro-economic adjustment and control on the Mainland, Monetary Authority Chief Executive Joseph Yam says, adding that this is good for the Mainland, Hong Kong and the world.

In his latest Viewpoint column on the authority's website, Mr Yam said the interest rate rise on the Mainland last week - the first in nine years - will complement the range of administrative measures taken to maintain macro-economic stability.

He said major financial markets' reaction to the interest rate move has demonstrated the Mainland's economic and financial importance in the world. Moreover, this is increasing rapidly, with high economic growth being sustained and greater trading and economic integration with the rest of the world.

Banks have also been given freedom to determine, subject to the caps specified by the People's Bank of China, the levels of deposit interest rates. Mr Yam believed this is also a significant change, in spirit, in that there will be greater freedom for banks to influence funding costs.

He hopes the next steps in the Mainland's interest rate reform will be in the direction of further liberalisation so that banks are given freedom to determine all deposit and lending rates in accordance with their commercial interests.