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No timetable for RMB convertibility under capital accounts: official
Latest Updated by 2006-03-03 15:26:14

A senor official of the People's Bank of China said Thursday that there is no timetable to further relax regulations that govern converting the Renminbi under capital accounts.

Hu Xiaolian, deputy governor of China's central bank and director of the State Administration of Foreign Exchange (SAFE), told Xinhua that although it is a firm goal of China's foreign exchange system reform, the rules for converting the RMB under capital accounts must be put forward step by step.

The current mission is to strengthen regulations governing the cross-border flow of capital and promote a more balanced international balance of payments, said Hu.

Hu expressed the same opinion when meeting with Phil Gramm, former Republic U.S. senator and Vice Chairman of UBS Warburg, an investment banking firm and William McDonough, former president of the New York Federal Reserve Bank and Vice Chairman of Merrill Lynch & Co., a Wall Street Investment bank.

When meeting the guests, Hu said that some improvements have been made for the liberation of the RMB capital accounts.

Hu gave four examples of recent improvements. Domestic enterprises investing overseas using foreign exchange are being encouraged.

Since the implementation of the Qualified Foreign Institutional Investor (QFII) system, 5.97 billion U.S. dollars has been invested in China. Also some foreign investment institutions have been permitted to issue bonds in RMB to provide loans for domestic enterprises. And regulations have been standardized for strategic investments by foreign investors in Chinese domestic listed companies.

However, Hu said that RMB convertibility under capital accounts is a complicated issue. It is a process that should be adapted to China's economic development, capability of macro-control and financial regulation, the maturity of financial markets and the risk management capability of market players.

Despite the recent reforms the governor doesn't know when further changes may occur. "There is no timetable for China's RMB convertibility under capital accounts," said Hu.

The steady advancement of changes to China's RMB capital accounts is not only good for China, it will also be beneficial to the world economy, Hu said.

Both Gramm and McDonough agreed with Hu. McDonough said that it is not practical for China to completely free its RMB capital accounts.

Without a perfect financial system, such a move could be dangerous, he said.

Editor: Yan

By: Source:China View website
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