THE convertibility of the Chinese yuan in terms of tradeable goods next year is definitely achievable. This is the view being taken by economists in Hong Kong and Singapore. Full convertibility on the capital account, as opposed to the current account, however, remains some way off. It might not be practical until near the end of this decade or, indeed, until 2000. Full convertibility requires the floating of domestic interest rates to reflect movements in capital, instead of the fixed rates now in force. Zhu Rongji, China's Executive Vice-Premier, was reported at the weekend saying full convertibility of the yuan on the current account was planned for next year. In practical terms, China already has attained convertibility on the current account. This has effectively been so for about two years, say economists. The unification of the yuan, between the official and swap centre rates on January 1, 1994, was recognition of progress being made in tradeable goods convertibility. At Peregrine Brokerage, economist Ma Guonan expects a phased set of changes towards full convertibility on the current account as opposed to a single big leap. The changes to look out for on the way concern the relative treatment of domestic and foreign-linked joint ventures in tradeable goods. The way in which domestic organisations access foreign exchange with regard to tradeable goods needs to be formalised. At present there are a series of formal and informal administrative arrangements that need clearing up. Foreign joint ventures will no longer have to balance their foreign exchange generation with their yuan exposure, or position. Foreign exchange neutral positions by these entities have already been eroded significantly, but once again the practices on the ground need to be formalised. Another key step requires allowing foreign joint ventures access to the domestic inter-bank market. Jim Walker at Credit Lyonnais Securities Asia in Singapore says conditions are ripening all the time for these wrinkles to be ironed out. Convertibility of the yuan, on any basis, needs to be welcomed. China has substantial reserves, in excess of US$72 billion, to back its currency and the present moderate growth in the economy appears to offer policymakers ideal conditions for convertibility. The big test for Beijing will be when the economy picks up, leading to a sucking in of imports. Since unification of the yuan's official and swap rates we have seen an appreciating yuan. Depreciation will be on the cards should a buoyant economy suck in imports without a balancing or compensating growth in exports.