China central bank eyes reform, more flexible yuan in 2013
BEIJING (Reuters) - China will press ahead with reforms to allow more flexibility in the yuan's exchange rate and the remaining barriers to creating a cross-border currency trading zone could be cleared in the first half of this year, senior officials said on Wednesday.
Yi Gang, deputy governor of the People's Bank of China, reiterated Beijing's commitment to currency reform on the sidelines of the annual meeting of China's parliament, the National People's Congress (NPC).
"We will continue to reform and open up. I'm confident that the renminbi (yuan) exchange rate will be more balanced and flexible and basically stable," Yi, who also heads the State Administration of Foreign Exchange (SAFE), China's FX watchdog, told reporters on the sidelines of the NPC.
Sources with knowledge of the latest PBOC thinking have told Reuters that China is set to use swelling offshore holdings of its tightly-managed currency worth around 1 trillion yuan ($160 billion) to justify a landmark shift in tactics to relax capital controls.
Separately Zhang Ping, head of the National Development and Reform Commission (NDRC), the country's top economic planning agency, told an NPC news conference that plans for China's currency trading pilot program were progressing smoothly.
Zhang said only six of 22 measures needed to get a $45 billion special economic foreign exchange trading zone up and running in Qianhai, near the border with Hong Kong, were outstanding and likely to be resolved in the first half of 2013.
"We are hopeful of coming up with plans to solve those problems in the first half of this year," Zhang said.
Outstanding issues included ones related to legal practices, given differences in the judicial systems of the mainland and Hong Kong - a special administrative region of China governed under the principle of "one country, two systems".
China set up the Qianhai business zone offering freer currency movements and Hong Kong professional standards last June. The government released rules in December for companies that incorporate in the area to borrow yuan loans from Hong Kong banks with interest rates and tenors to be fixed independently. Continued...