China promises to loosen capital control, but no rapid progress expected

Julia Yang's spirits rose when the Communist Party said this month it would accelerate the deregulation of the mainland's capital account to facilitate cross-border investment.

"I will sell one of my apartments in Beijing to escape the property tax that will be launched sooner or later," said the accountant, who owns two flats. "I will buy some US stocks or look into properties in Europe, where investment opportunities should be better."

Hastening the yuan's convertibility under the capital account was one of the key reform proposals decided on at the third plenum of the party's Central Committee, according to a document released on November 15. Targets for what amounts to partial convertibility are planned to be achieved by 2020.

When the capital account is fully opened, foreign direct investment, portfolio investment and other cross-border investment can be conducted without restrictions on converting yuan.

Yang's plans partly justify the concerns expressed by many economists. They say the pace of capital account opening up will be slow because policymakers are worried about large capital outflows in the initial years of opening up and speculative capital activities that could cause financial turmoil in the absence of sound regulatory measures.

"Many people have high hopes of capital-account liberalisation but I think the new leaders will be cautious in advancing the reform," said Lu Ting, an economist at Bank of America Merrill Lynch.