China economy

More convertible yuan next goal, China's central bank chief says

Zhou Xiaochuan underscores pledge to promote freer movement of capital in and out of China

PUBLISHED : Sunday, 18 November, 2012, 12:00am
UPDATED : Monday, 30 May, 2016, 5:00pm


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The People's Bank of China's next step in the overhaul of the exchange-rate system would focus on convertibility, governor Zhou Xiaochuan said yesterday, as his omission from a top Communist Party committee fuelled speculation he may retire.

"For the central bank, the next movement related to the yuan is going to be reform of convertibility," Zhou told the annual meeting of International Financial Forum, an advisory group, in Beijing. "We are going to realise it, we are moving in this direction, we need to go further, we will have some deregulation."

The governor's comments underscore pledges made by the ruling Communist Party during a once-a-decade power transition last week to promote freer movement of capital in and out of the country for investment purposes and to make the exchange rate more market based.

China is seeking to boost the use of the yuan in international trade and finance to reduce the US dollar's global dominance, and curb its own reliance on the currency of the world's biggest economy.

Zhou, who has headed China's central bank for the past decade, was not named to the new central committee of the Communist Party last Wednesday, suggesting he will probably leave his job. At a November 11 press briefing, Zhou did not directly answer a question on retirement.

The government of Premier Wen Jiabao in March picked Wenzhou , a city in the eastern region dominated by smaller, non-state enterprises, for a trial programme designed to boost capital for private companies that bore the brunt of an economic slowdown that started in 2010.

Zhou said the pilot scheme was hindered partly by the euro-zone debt crisis as the local economy was heavily reliant on exports to European markets.

China had designated areas including Shanghai, Tianjin and the Pearl River Delta to trial reforms in the financial services industry, Zhou said. This would allow the country to accumulate experience and test for what could go wrong, he said.

The new government would continue to value changes initiated at local level by governments and companies while still attaching great importance to overall planning, he said.

In a separate speech at Caixin Media's annual conference in Beijing, Zhou said the central bank needed to be especially alert to the threat of inflation as the country moves from a planned to a market economy.