A new interest rate indicator, called the Shanghai inter-bank offered rate (SHIBOR), will go into operation on Jan. 4, the central bank announced here Wednesday.

The mechanism, which will give the central bank real-time market information on interbank interest rates, may become a new benchmark for the money market, said the People's Bank of China (PBoC).

China's current benchmark interest rate, based on the deposit and loan interest rates of financial institutions, is a controlled rate.

Where the previous benchmark rate system was based on buyback and knock-down prices, SHIBOR is based on the daily rate for all loans offered by sixteen major banks.

The system is similar to London's LIBOR, which is the most widely used benchmark for short-term interest rates in the international money market.

The central bank said the SHIBOR will consist of eight declaration products with maturities varying from overnight to one-year. Sixteen commercial banks will be included in the price declaration group.

At 11:30 a.m. each trading day, prices of the eight declaration products will be announced at www.shibor.org after the prices for all products offered by all institutions have been weighted and averaged, said the PBoC.

China's SHIBOR will provide a benchmark for pricing short-term bonds and derivatives on the money market. It will be a key indicator of interest rates in the money market, injecting real-time market information into monetary control policy.