There was something almost mischievous about China’s surprise cut in its banks’ reserve requirement ratio, at 7:03pm Beijing time on Wednesday. True to form, this put a rocket under Asian equities on Thursday. But the fact that the first cut to the RRR in three years is seen as a decisive policy shift shows how badly China has stalled on what it claims to be a priority: interest-rate reform.

In his nine years as governor of the People’s Bank, Zhou Xiaochuan has repeatedly stressed his desire to work towards market-determined rates of interest. But deposit rates are still subject to a cap and lending rates to a floor. As the International Monetary Fund noted last month in its first formal report on the stability of China’s financial system, banks do enjoy a little flexibility in setting lending rates around that floor. However, the distribution of actual rates, expressed as multiples of the one-year benchmark, has barely changed during the past six years. The proportion of loans bang-on the benchmark rate, in fact, is up by about a fifth over that period.

Guaranteed interest margins – an average spread of 324 basis points between deposits and loans since 2005 – mean that commercial banks do not compete so much on their ability to assess risk, as on their ability to anticipate state directives about the pace and direction of new lending. Investors seem wise to this. Judging by the negligible reaction in market prices to interest-rate adjustments in recent years, markets realise that the really significant policy turns are still signalled through loan quotas and the RRR: the proportion of deposits that must be locked away as reserves with the PBoC.