Beijing, Aug 3 (IANS): China's insurance industry regulator said that it will relax controls on interest rates for standard life insurance products, marking the country's latest effort to deepen market-oriented reforms in its financial system.

The 2.5 percent upper limit on pre-determined interest rates of standard life insurance products will be removed starting Aug 5, according to a notice posted by China Insurance Regulatory Commission (CIRC) on its website Friday.

The measure represents China's latest effort in interest rate liberalisation, following the central bank's key move to loosen its grip on bank lending rates, Xinhua reported.

Under the new regulation, insurance companies can set their own rates in line with prudent principles, but for risk prevention purposes, a new cap of no more than 3.5 percent will be applied for the statutory reserve requirement assessment ratio of standard life insurance products.

The new regulations are expected to encourage innovation within the industry to spur products that satisfy consumers' real demands, said Yuan Xucheng, an official at CIRC's life insurance department.

To mitigate potential risks and balance the industry, CIRC also rolled out a string of accompanying measures, including a differentiated policy to boost old-age pension business and moves to support risk prevention insurance business.