Wen signals way to yuan internationalization

Updated: 2012-03-20 07:29

By Chen Jia (China Daily)

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Maintaining steady economic development and further strengthening financial regulations are basic to the internationalization of Chinese currency, and have consolidated the government's stance to speed up relevant reforms, Premier Wen Jiabao told global business leaders at a forum on Monday.

The government is pushing forward policy innovations and regulations to make the yuan float more freely, and the currency will be freely convertible "at the right time", the premier said to delegates at the China Development Forum 2012.

"The direction of our economic reform and policies will not change or stop," Wen said, encouraging foreign company executives to strengthen confidence in the country's future.

China's gigantic global trade volume has driven the government to approve yuan-denominated cross-border settlements on deals. The premier also called for long-term solid trade relationships with foreign partners, which needs help from a more freely convertible yuan.

The yuan reached 6.31 per US dollar on Monday, the strongest since March 9. But it has weakened 0.4 percent in the past three weeks, according to the China Foreign Exchange Trade System. The yuan has appreciated about 30 percent against the dollar since July 2005.

"It is a prefect time now to make the yuan exchange rate more flexible and push forward the financial system reforms," Yu Yongding, an economist with the Chinese Academy of Social Sciences, said at the forum.

International Monetary Fund Managing Director Christine Lagarde said on Sunday that further economic reform could help China's currency to become a global reserve currency.

In order to boost the internationalization of the currency, China has designated Hong Kong as the offshore center for yuan trading, where companies can directly raise funds in yuan. Singapore and London are also seeking to be yuan trade centers.

Currently, the People's Bank of China, the central bank, is revising regulations and waiting for the right time to open a capital account system, which is key to freeing up the exchange rate.