Central bank governor Zhou Xiaochuan listens to IMF chief Christine Lagarde at the China Development Forum in Beijing yesterday. Photo: EPA
Source:
https://scmp.com/business/banking-finance/article/1744905/pboc-further-ease-yuan-capital-controls-reserve-currency Banking & Finance
PBOC to further ease yuan capital controls in reserve currency bid
Central bank chief vows to further liberalise capital account controls
Over the past decade, Chinese exports have become a larger slice of global trade while the yuan's use in trade and settlement has expanded significantly. Photo: Bloomberg
People's Bank of China governor Zhou Xiaochuan yesterday pledged to further liberalise capital account controls this year in a bid to create conditions for the International Monetary Fund to include the yuan as an international reserve currency.
Joining Zhou at the China Development Forum in Beijing, IMF managing director Christine Lagarde said the criteria used over the past 10 years for assessing the opening up of capital accounts might be revised, as the global financial crisis had shown the process should not move too fast.
The comments may boost the odds for the yuan to join the IMF's Special Drawing Right (SDR) in October in the agency's first review of the currency basket since 2010, even if China has not fully opened up its capital account by then.
The basket is now made up of the US dollar, euro, yen and pound sterling. Zhou has pushed for the yuan to be added to the SDR basket for more than five years.
"There is a reasonably high chance that this year's vote will go China's way," said David Lubin, head of emerging markets economics at Citigroup, in a note on March 12.
"So we may soon be in a world where the renminbi becomes a reserve asset - which would happen by definition if it becomes part of the SDR - without being freely convertible."
Zhou said China would facilitate individual investment in domestic and international capital markets, further open its capital market to global investors, and allow domestic investors to invest in and sell securities overseas.
Foreigners must now buy mainland-listed securities through the qualified foreign institutional investor scheme, which "is not convenient and flexible enough", Zhou said. A new policy and trials would be launched this year, he said.
At Fudan University in Shanghai on Friday, Lagarde said the yuan would at some point be included in the SDR, but there remained "a lot of work to be done".
"It's not a question of if - it's a question of when," she said.
Meanwhile, Vice-Premier Zhang Gaoli told the forum in Beijing that "development remains the foundation and key for solving any problems" as China entered a new phase of growth.
Beijing cut its annual growth target to about 7 per cent this year after economic expansion slowed to a 24-year low of 7.4 per cent last year.
Even so, the leadership has warned that hitting the target will be challenging.