No date for fully convertible yuan

(Shanghai Daily)

08:07, September 09, 2011

The central bank chief yesterday poured cold water on talk that China could make the yuan fully convertible by as soon as 2015.

People's Bank of China Governor Zhou Xiaochuan said the nation's economic plan for 2011-2015 included the goal of scrapping restrictions that mean the yuan cannot be freely traded for purposes other than trade and investment.

But, speaking to reporters in London, Zhou added: "Up to now, the plan does not define a clear timetable for full convertibility."

He was commenting on media reports that quoted the president of the European Union Chamber of Commerce in China as saying he had been told by Chinese officials that Beijing would make the yuan fully convertible by 2015.

China has been promoting the international use of the yuan in trade for the past two years to reduce the country's reliance on dollar financing. A thriving market in yuan-denominated bonds and deposits has sprung up in Hong Kong as a result.

This has led some commentators to conclude that China would speed up efforts to meet its long-standing goal of making the yuan, also known as renminbi, freely convertible.

Mark Williams, chief China economist at Capital Economics in London, said he was highly skeptical of the 2015 timeline.

"Full convertibility would require both that the renminbi first appreciates to around its fair market value and that the government is comfortable allowing conditions in its banking sector and financial markets to be dictated in part by foreign investors. Neither seems likely," he said in a report.

Zhou is part of a government delegation visiting London for regular talks. Vice Premier Wang Qishan, who has responsibility for economic and financial policy, is leading the delegation.

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