China pledges more financial reform by 2015
2012-09-17 18:00:21
China said Monday it would move to allow its currency to float more freely and further liberalise state-set interest rates in a broad financial plan through 2015.
Financial regulators voiced support for reform in the five-year plan for the 2011-2015 period, which was released by the central bank on Monday.
The plan said China would move towards making its tightly-controlled currency, the yuan, fully convertible while allowing more fluctuations in the exchange rate -- a perennial political issue with the United States.
Washington has repeatedly urged China to allow its currency to strengthen with US officials claiming the yuan is vastly undervalued.
China will "strengthen two-way fluctuations of the renminbi (yuan) exchange rate and maintain basic stability of the exchange rate at a reasonable and balanced level", the plan said.
Beijing defends its exchange rate regime, saying it is moving gradually to make its currency more flexible.
In April, the central bank loosened some controls over the yuan by allowing it to trade in a wider range on either side of a set level.
Some analysts claim the value of the yuan is approaching equilibrium given the slowdown in China's economy, the world's second largest.
China "will take steps to ease controls on cross-border capital flows", the plan said, adding the goal was full convertibility of the yuan. It gave no specific timetable.
Head of China's national social security fund, Dai Xianglong, said last week that China planned "major breakthroughs" towards liberalisation of its capital account in the next three to five years, state media reported.
The financial plan also said China would move towards market-set interest rates, but gave no specific details.
Earlier this year, the central bank gave banks more flexibility to set interest rates, effectively introducing greater competition and improving allocation of capital -- reviving a reform shelved for nearly a decade.
Liao Qun, chief economist of Citic Bank International in Hong Kong, said the government's approach to financial reform would be gradual.
"The two reforms must be carried out so that the financial markets and domestic banks can bear them, so they cannot be achieved at one stroke, but rather in a progressive way," he told AFP.
Authors of the plan included the People's Bank of China, the country's central bank, as well as the foreign exchange, banking, insurance and securities regulators.