Capital account norms may be eased

China will continue to open up its financial sector this year despite the challenges in the international financial market, the nation's central bank said on Friday.

In its 2008 international financial market report, the People's Bank of China, the central bank, said that as long as the risk is controllable, it would gradually relax the restriction on capital account deals, and continue to work towards the full convertibility of the yuan.

The nation will also help domestic financial institutions enter the international financial market in an "active" but "prudent" manner, the report said.

During the second session of the 11th National People's Congress, which concluded on Friday in Beijing, top government officials have pledged to encourage domestic financial institutions to invest abroad. Major lenders have also promised to provide credit support for such overseas investments.

Though the global financial turmoil will continue this year and its impact on the global and Asian economies could worsen, the central bank predicted the global economy may possibly turn the corner later this year. The international financial sector could stabilize and pick up in the second half, as the stimulus policies of a number of countries would take effect by then, the central bank said.

Developed economies will maintain their lead position in the international financial order this year, but emerging economies are likely to have a bigger say in the international financial regime, the report said.

Leaders from both developed and emerging economies would gather in London later next month to attend the high-profile G20 summit, in which the developing countries are expected to seek more seats in the major international organizations, besides discussing more effective ways to take the global economy out of the woods.

Meanwhile, a quarterly survey conducted by the central bank revealed that Chinese bankers are now slightly more confident about the country's economic prospects than they were three months ago.

Though the index measuring bankers' confidence on the economy dipped 1.7 percentage points from the previous quarter, the drop was 17 percentage points less than the fourth quarter of 2008.

Over half of the bankers surveyed felt the current monetary policy is appropriate, while 45.1 percent believed it is relatively relaxed, up by 26.2 percentage points from a quarter earlier. More than half of the respondents expressed the view that the monetary policy would remain unchanged in the second quarter of this year.

The loan demand index also edged up 5.6 percentage points from last quarter to reach 67.5 percent, with the demand from all industries increasing, according to the survey.

(China Daily 03/14/2009 page10)