Beijing yesterday denied it was considering a free-float of its currency by the first quarter of next year but analysts said a more flexible exchange rate was already on the cards.
Hong Kong-based Chinese-language daily Ming Pao reported that Premier Zhu Rongji had told a delegation of Hong Kong businessmen that the International Monetary Fund had suggested the yuan be freely floated by the final quarter of this year or early next year, and that he was seriously considering the proposal.
Mr Zhu would ask the Hong Kong Government to submit a report on the impact of such a move on the Special Administrative Region, according to the report. However, a central bank official said he was unaware of any such request by the IMF, and that there was no change in currency policy.
Jin Liqun of the Ministry of Finance was also quoted in Tokyo as saying he was comfortable with the existing managed float for the yuan. 'We do not think it is good for the yuan to fluctuate within too wide a range,' he said.
The mainland allows currency convertibility on the current account, which includes trade, though it keeps controls on the capital account, which covers investment.
IMF officials had no immediate comment on the report but economists said Beijing would not allow a free float for its currency in the near term.
'It is impossible for the yuan to have an all-out free float at this time,' said Liao Qun, an economist at Standard Chartered Bank in Hong Kong.