'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)