China to gradually make yuan fully convertible
China will gradually make its currency, the yuan, fully convertible, Vice Premier Huang Ju has said, addressing one of the key concerns of the world economy.
"We will relax restrictions on yuan transactions under the capital account in a step-by-step manner in order to achieve gradual capital account convertibility," he told a banking conference in Beijing.
The yuan is convertible on the current account for trade in goods and services, but not on the capital account, which includes items such as direct investments, international loans and securities investments.
The yuan is effectively pegged at 8.28 to one US dollar. China's major trading partners have been pressing it to make its foreign exchange regime more flexible.
Huang also said that China will meet its obligations to the World Trade Organization to open up its financial sector to foreign institutions.
Beijing will encourage foreign firms to take part in the reform of state-owned companies in general and to play a role in reforms in the lagging inland provinces in particular.
Huang said banking reforms, including the restructuring of state-owned China Construction Bank, have already produced results.
Risk controls and earnings are improving at the bank as well as other state institutions, he said.
China's financial regulators have encouraged a restructuring of the bank with a major recapitalization program.
In addition to injecting fresh capital, Beijing has encouraged tie-ups with foreign strategic investors ahead of a stock offer and flotation.
Huang said Beijing will also push forward reforms of other financial institutions but he did not give details.
China has also been moving ahead with reforms of the Bank of China and the
Industrial and Commercial Bank of China.