Exclusive: China plans greater yuan convertibility inside and outside FTZs

Fri Apr 24, 2015 6:52am EDT
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By Zheng Li and Koh Gui Qing

BEIJING (Reuters) - China plans to take a giant step toward making the yuan more convertible by extending a pilot scheme allowing the currency to be traded with few restrictions to all its free trade zones, before taking the scheme nationwide later this year.

The liberalization, revealed to Reuters on Friday by three sources with knowledge of the plan, underlines China's ambition to transform the yuan CNY=CFXS into a major global currency.

"Once this is done, this will be a big step forward in opening China's capital account," said one of the sources, who all declined to be named as they were not authorized to speak to the media.

The timing would aid Beijing's campaign this year to persuade the International Monetary Fund to include the yuan in its currency basket.

Under the pilot scheme, firms in the Shanghai free trade zone (FTZ) can move the yuan and other foreign currencies in and out of China for capital account transactions. That lets them raise money overseas and bring the funds back to China for real investment - a practice that is otherwise banned in China.

In coming months firms in China's other FTZs - in Tianjin, Fujian and Guangdong - will be granted the same right, the sources said, though one said the roll-out would be staggered due to concerns over rising capital outflows.

Thereafter, the plan is to expand the scheme across China by the end of the year, they said.

No details were available on how the experiment will be expanded nationwide, and the central bank did not comment when contacted for this story.   Continued...

A woman counts Chinese yuan notes at a market in Beijing, July 1, 2013. REUTERS/Jason Lee