Opening-up, innovation to be pivot for financial sector reforms

Financial industry opening-up and innovation will gather speed this year as policymakers further streamline capital account convertibility process in China, a leading financial expert said.

Capital account convertibility, or allowing foreign capital to flow freely into and out of China, will be one of the key priorities during the 14th Five-Year Plan period (2021-25), Huang Yiping, deputy dean of the National School of Development at Peking University, told China Daily in an interview.

"We may see more breakthroughs in China's financial opening-up during the five-year plan period," he said.

Huang, who is also a former member of the central bank's monetary policy committee, said liberalizing the renminbi exchange rate would be a good precursor to the full opening-up of the domestic capital markets. Measures are also necessary to prevent any potential risks and volatility, he said.

According to Huang, basic convertibility of the renminbi may occur by 2025 along with a significantly higher global acceptance of the Chinese currency among investors. China's rapid growth will support the stronger currency and so also the increased foreign investment in the onshore bond and stock markets.

Renminbi-denominated financial assets will remain attractive for foreign investors at that time as central banks in several developed economies are planning to maintain close-to-zero interest rates and quantitative easing to spur growth, he said.

"I expect the Chinese financial market to continually attract foreign capital this year, but we need to pay attention to the potential risks from booming asset prices and currency appreciation."

Financial regulators must use macro-prudential measures or regulations to safeguard the financial system, to limit volatility in the capital market, said Huang.