China's forex regulator moving toward opening capital account

13:25, August 04, 2010      

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Judging from recent new policies, China's foreign exchange regulator may move to open up its capital account, said some analysts despite the State Administration of Foreign Exchange (SAFE) Director Yi Gang's contention that there is no official timetable to make the yuan convertible.

In June 2010, SAFE simplified the approval of certain kinds of foreign exchange businesses within the capital account. Meanwhile, as the central bank has been pushing forward the internationalization of the yuan and there are discussions about establishing an international board on the Shanghai Stock Exchange, market expectations of a convertible yuan are rising.

Insiders from SAFE noted that the convertibility of the yuan is the presupposition of yuan internationalization, adding that it is necessary to establish an offshore yuan market, according to today's China Securities Journal.

In face, Hong Kong has recently accelerated the construction of the offshore yuan trade center.

On July 19, the People's Bank of China and the Hong Kong Monetary Authority (HKMA) signed agreements to ease restrictions on yuan transfers between banks and companies in the city, seeking to encourage use of the currency in the Asian finance hub.

The People's Bank of China and the Hong Kong Monetary Authority also agreed that the city will have no restrictions on yuan deposit holders transferring cash to buy wealth-management products, HKMA Chief Executive Norman Chan said at the signing ceremony.

However, there are also experts who are very cautious about the opening of the capital account. Yu Yongding, former member of the central bank's monetary policy committee, said in an article that capital control is the "last resort" for China's financial stability and that the free conversion of yuan should be the last step of the marketization reform.

By People's Daily Online


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