A senior official of the People's Bank of China (PBC) said on 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 developed step by step.
The current mission is to strengthen regulations governing the cross-border flow of capital and promote more balanced international payments, Hu said.
Hu also discussed these issues during a recent meeting with Phil Gramm, former Republican US senator and Vice Chairman of UBS Warburg, and William McDonough, former president of the New York Federal Reserve Bank and Vice Chairman of Merrill Lynch & Co.
Hu said that some improvements have been made for the liberation of RMB capital accounts, and added that non-RMB overseas investments by domestic enterprises are being encouraged.
Since the implementation of the Qualified Foreign Institutional Investor (QFII) system, US$5.97 billion has been invested in China. In addition, some foreign investment institutions have been permitted to issue bonds in RMB as loans to domestic enterprises. Further, 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, its system of macro-control and financial regulation, the maturity of its financial markets, and the risk management capability of market players.
Despite the recent reforms, Hu doesn't know when further changes will be made. "There is no timetable for China's RMB convertibility under capital accounts," he said.
But he did acknowledge that the steady reform of China's RMB capital accounts will benefit both China and the world economy.
(Xinhua News Agency March 3, 2006)