The effectiveness of capital controls is declining and China needs to seize the window of opportunity to further open up the country's capital account to allow the yuan to be more freely convertible, China's central bank governor said Tuesday.
"We should improve convertibility for transactions in the capital market and further facilitate the convertibility for direct investment, direct investment liquidation and direct financing, and convertibility for transaction of derivative financial tools could be enhanced," Zhou Xiaochuan, governor of the People's Bank of China, said while attending a forum in Beijing Tuesday.
"We should maintain the flexibility of the policy and make it more targeted based on the domestic and international economic situation, and may take some temporary and special measures (to push ahead with the reform)," he said.
The central bank will improve the yuan's flexibility while keeping the exchange rate basically stable at a reasonable and balanced level, said Zhou.
Zhou said he made the remarks based on his understanding of the keynote report of the 18th National Congress of the Communist Party of China, which concluded last week. His remarks were widely believed to be a hint as to the direction of financial reform in the next few years.
"Though the country's economy is slowing down, it is still growing at a robust pace compared with other economies. Investors have more confidence in a market where growth is strong," Song Guoliang, a finance professor at the University of International Business and Economics in Beijing, told the Global Times Tuesday.
"So it's high time for the country to further free the capital account and make the yuan convertible to allow more foreign investors to participate in the market," Song said.
Landmark building should respect the public's feeling
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