Central bank pushes foreign exchange reform

Updated: 2005-11-25 20:17

Late Thursday, China's State Administration for Foreign Exchange announced it would also introduce a new currency trading system allowing interbank market members to trade directly with each other. It also invited qualified members to apply to become market makers for yuan spot trading.

A market maker agrees to act as either a buyer or seller in a financial transaction when no other party can be found. Currently, the central bank is China's key market maker in U.S. dollar trading due to tight restrictions on foreign exchange dealings, though regulators earlier announced they were considering letting other banks become market makers.

The yuan doesn't trade on world markets and Beijing sharply restricts buying and selling on the Chinese exchange.

Since a 2.1 percent revaluation of the yuan on July 21 to 8.11 yuan per dollar, the Chinese currency has gained only 0.36 percent.

China's leaders have pledged further reforms to loosen currency restrictions, but say its banks and other financial institutions need time to adjust to handling foreign exchange risks.