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'No timetable for RMB convertibility'
By Chuan Yu (China Daily)
Updated: 2006-03-04 07:34
China has no timetable for making its currency, or renminbi, fully
convertible on the capital account, the foreign exchange regulator said on
Friday.
China has reiterated plans to
make its capital account basically convertible, state press said
Wednesday. [AFP] | Although it is the nation's long-term goal to make the currency convertible,
the reform needs to be done gradually, the State Administration of Foreign
Exchange said on Friday.
China's forex regulator said it wants to enhance the surveillance of
cross-border capital flow, steadily promote the convertibility of the renminbi
and try to balance the State's international payments.
The Chinese currency is convertible on the current account, which includes
trade, but is only partly convertible on the capital account, which covers
portfolio investment and foreign direct investment.
China has been promoting the convertibility of renminbi on the capital
account in recent years. After foreign investors were allowed to invest in the
renminbi-denominated A-share market through qualified foreign institutional
investors (QFIIs) four years ago. Such QFIIs have so far been granted investment
quotas totalling US$5.97 billion.
"However, we should note that the capital account convertibility of the
renminbi is a complicated systemic project, and the process needs to comply with
China's economic development, macroeconomic controls, financial supervision
capacity, financial market development and risk management capability of market
players," said Hu Xiaolian, State Administration of Foreign Exchange director
and deputy director of the People's Bank of China, in a statement published on
the administration's website.
The convertibility reform needs to be co-ordinated with others, and the
international economic situation and financial conditions must also be taken
into consideration, she said.
The partial convertibility was seen as a major factor that helped protect
China from the full impact of the Asian financial crisis in 1997 and 1998.
Government officials and economists have said a gradual approach to
convertibility would also help ensure the success of the renminbi's exchange
rate reform.
China reformed its decade-old exchange rate regime last July, allowing the
currency to appreciate by 2 per cent against the US dollar to 8.11 and pegging
it to a basket of currencies instead of the US dollar alone.
(China Daily 03/04/2006 page1)
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