FT.com / World / Asia-Pacific - China commits to currency reform
FT.com / World / Asia-Pacific - China commits to currency reform
China commits to currency reform
>By Richard McGregor in Beijing
>Published: February 27 2005 19:11 | Last updated: February 27 2005 19:11
China has committed itself to a package of measures to open further its capital account this year in what the government says is part of its long-term plan to make the Chinese currency fully convertible.
Guo Shuqing, the head of the State Administration of Foreign Exchange, which sets the rules for capital flows in and out of the country, at the weekend detailed five measures designed to ease upward pressure on the renminbi, the Chinese currency.
They include allowing insurance companies to invest overseas, easing foreign direct investment by local enterprises and approving renminbi-denominated bond issuance by “foreign development organisations”.
The Chinese government has already had discussions with the International Finance Corporation, an arm of the World Bank, and the Asian Development Bank, about the renminbi bonds, officials said.
“[China]China commits to currency reform
>By Richard McGregor in Beijing
>Published: February 27 2005 19:11 | Last updated: February 27 2005 19:11China has committed itself to a package of measures to open further its capital account this year in what the government says is part of its long-term plan to make the Chinese currency fully convertible.
Guo Shuqing, the head of the State Administration of Foreign Exchange, which sets the rules for capital flows in and out of the country, at the weekend detailed five measures designed to ease upward pressure on the renminbi, the Chinese currency.
They include allowing insurance companies to invest overseas, easing foreign direct investment by local enterprises and approving renminbi-denominated bond issuance by “foreign development organisations”.
The Chinese government has already had discussions with the International Finance Corporation, an arm of the World Bank, and the Asian Development Bank, about the renminbi bonds, officials said.
“[China] will gradually ease the amount of renminbi that can be exchanged under the capital account, taking another step towards achieving full convertibility of the currency,” Mr Guo was quoted as saying.
The measures announced by Mr Guo have nearly all been already tried in small pilot programmes, or have been announced previously in a more low-key fashion.
But, by bundling them into one single announcement, China has sent a clear signal about its commitment to currency reform to the foreign governments, led by the US, that have been pressuring it to revalue the currency.
The Chinese currency has been pegged to the US dollar since the mid-1990s, a policy which a number of foreign governments claim is giving Chinese exporters an unfair advantage. China has long committed itself to replacing the US dollar peg with a more flexible exchange rate system, but has refused to fix a timetable.
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