Central bank pushes foreign exchange reform
Updated: 2005-11-25 20:17
Late Thursday, China's State Administration for Foreign Exchange announced it
would also introduce a new currency trading system allowing interbank market
members to trade directly with each other. It also invited qualified members to
apply to become market makers for yuan spot trading.
A market maker agrees to act as either a buyer or seller in a financial
transaction when no other party can be found. Currently, the central bank is
China's key market maker in U.S. dollar trading due to tight restrictions on
foreign exchange dealings, though regulators earlier announced they were
considering letting other banks become market makers.
The yuan doesn't trade on world markets and Beijing sharply restricts buying
and selling on the Chinese exchange.
Since a 2.1 percent revaluation of the yuan on July 21 to 8.11 yuan per
dollar, the Chinese currency has gained only 0.36 percent.
China's leaders have pledged further reforms to loosen currency restrictions,
but say its banks and other financial institutions need time to adjust to
handling foreign exchange risks.