There are increasing calls for Beijing to accelerate the yuan's convertibility under the capital account, which could hasten its transformation into a world currency.
Mainland policymakers have long defended restrictions over cross-border investments by citing the need to shelter the nation's financial system from fluctuations in the global economy. However, many economists and officials are now trying to convince Beijing that the benefit of lifting the restrictions is increasingly outweighing the costs.
Xie Ping, executive vice-president of China Investment Corp, which is the manager of the nation's US$300 billion sovereign fund, told a seminar last month that he hoped the government could complete the much-needed reform by 2013.
'We have met the prerequisites: a stable macroeconomic environment, a sound financial regulatory system, sufficient foreign reserves and prudent and healthy financial institutions,' Xie said, adding mainland policymakers should accept the 'political risk'.
The mainland's foreign exchange reserves increased by US$138 billion in the first quarter of the year, the State Administration of Foreign Exchange (SAFE) said yesterday. The reserves swelled to more than US$3 trillion at the end of March, adding to pressure to invest more aggressively abroad.
Xie said opening capital accounts could give the most effective support to policies encouraging companies and individuals investing overseas, and lay the foundation for the yuan to become a world currency. A capital account includes foreign direct investment, plus changes in holdings of stocks, bonds, loans, bank accounts and currencies.