China: No timetable on yuan convertibility
(Reuters)
Updated: 2006-03-03 07:34

China has "no timetable to further relax regulations" about converting its yuan currency under capital accounts, a senior Chinese central banker said on Thursday, apparently tempering earlier reports.

Hu Xiaolian, a deputy governor at the People's Bank of China -- the country's central bank -- told the Xinhua News Agency that "rules for converting the RMB under capital accounts must be put forward step by step".

"There is no timetable for China's RMB convertibility under capital accounts," she separately told U.S. guests, Xinhua also reported.

Hu, who is also director of China's State Administration for Foreign Exchange (SAFE), said her country's "current mission is to strengthen regulations governing the cross-border flow of capital and promote a more balanced international balance of payments".

Hu's remarks appeared designed to dampen down a report in a Chinese financial newspaper on Wednesday that suggested China may move faster on yuan convertibility on the capital account.

The Shanghai Security News quoted another official at SAFE, Zou Lin, as saying, "China plans to make the yuan basically convertible under the capital account in the near term".

The government could ease controls on overseas investment under the Qualified Domestic Institutional Investor (QDII) programme, and keep the inflow and outflow of capital balanced, Zou said.

While the yuan is convertible on the current account, which covers trade, China still restricts most capital account deals and analysts say full convertibility could be years away.

China revalued the yuan by 2.1 percent last July, scrapping a decade-long peg to the dollar and shifting to a managed float, but it is under pressure from the United States and others to move faster towards a liberalised currency system.

But the Xinhua report said Hu told U.S. guests that China wanted slow, methodical adjustment of its current account convertibility rules.

Any change would be tailored to fit China's economic conditions, the "maturity" of its financial markets, and risk managing skills of market players, Hu was reported as telling retired U.S. Senator Phil Gramm and William McDonough, a former president of the New York Federal Reserve Bank.