China to step up moves for yuan convertibility

QFII reform policies also being planned for this year

A flurry of actions will be taken this year to press ahead with the yuan's convertibility under the capital account, China's central bank governor said on Sunday.

"Ramped-up [actions] to make the yuan convertible under the capital account was already mentioned four years ago when China made its 12th Five-Year Plan (2011-15)… Throughout this year, which marks the final year of the plan, we intend to achieve the goal through broad-based reform efforts," Zhou Xiaochuan, governor of the People's Bank of China, the country's central bank, said at the China Development Forum held in Beijing.

Currently, any investment in overseas securities or other financial products by domestic residents will require approval in advance, which is being prepared for an overhaul, Zhou stated.

In addition, a set of policies and pilot programs is in the pipeline this year to reform the Qualified Foreign Institutional Investor (QFII) scheme which has not been convenient and flexible enough to facilitate foreign residents' investment in the domestic financial market.

QFII, officially launched in 2003, is the main conduit available for foreign investors to trade domestically listed A shares denominated in the ­Chinese currency.

As of January 30, total quotas awarded under the QFII program had reached $67.98 billion, according to the latest available data from the State Administration of Foreign Exchange.

Following such moves, not only enterprise investment but investment by residents will be made much easier, "which could be said to make [the yuan] basically convertible under the capital account, or reach the standards of a freely usable currency," Zhou emphasized.

To meet the requirements for turning the yuan into a freely usable currency, the country's foreign exchange control regulations are set to undergo a new round of revisions, he also disclosed, without elaborating.

Speaking Sunday at the same forum, Christine Lagarde, managing director of IMF, remarked that she sees positive signs in China's liberalization of the capital account.

A slew of policies aimed at opening the capital account has already been implemented within the China (Shanghai) Pilot Free Trade Zone, a nationwide rollout of which would be expected this year in moving the yuan toward being convertible under the capital account, Liu Dongliang, a senior analyst with China Merchants Bank in Shanghai, told the Global Times on Sunday.

On the agenda, the central bank chief also put measures to push for further opening of the country's capital market, suggesting eased restrictions on the purchase of overseas securities, bonds by domestic investors, and more leeway given to securities and bonds issuers.

In anticipation of further measures, DBS Bank said in a research note e-mailed to the Global Times Tuesday that "broadening channels of yuan supply to the offshore market is needed by increasing the variety of offshore investable assets for mainland residents," while "permitting offshore banks to tap into the onshore interbank market for funding is another wise strategy."

At the forum, Zhou also reiterated that China will continue a prudent monetary policy amid a "new normal" of slower yet more balanced growth.

In the new normal, China will deepen reform, unlock new creativity for mass entrepreneurship, and foster new impetus for sustaining medium-to-high-level growth rate, Vice Premier Zhang Gaoli said Sunday at the forum.

Song Shengxia contributed to this story