A forum on the yuan's exchange rate fluctuations is held on Thursday during the Summer Davos in Dalian, Liaoning province. (Photo/China Daily)
Premier Li reiterates commitment and determination to push ahead with reforms
China may allow central banks from other nations to directly invest in the nation's interbank foreign exchange market as part of its efforts to attract more overseas investment, Premier Li Keqiang said on Thursday.
Speaking at the opening of the Annual Meeting of the New Champions, or the Summer Davos, hosted by the World Economic Forum in Dalian, Liaoning province, Li said it would also be a big step toward a fully convertible capital account, after the country allowed foreign central banks to invest in the interbank bond market in July.
The premier said China will also establish a yuan cross-border payment system by the end of this year, to expand the currency's use in offshore markets.
"We will continue to push forward the economic reforms, step by step, and the determination will not change. The pace will also not slow down," said Li.
He reiterated that the yuan's exchange rate will remain stable at a reasonable level, and the exchange rate reform is targeting a market-decisive regime rather than triggering a global "currency war".
Li's comments came as the yuan depreciated by about 3 percent against the US dollar since Aug 11, when the central bank said it was allowing the market to decide the daily reference exchange rate.
Investors have expressed concerns that the currency depreciation would trigger capital outflows and tighten liquidity in the financial market, especially after the bourses went into a tailspin.
The People's Bank of China, the central bank, cut interest rates for the fifth time since November and lowered the cash amount that financial institutions must set aside as reserves, to inject liquidity and stabilize the markets.
Bernhard Florian Kotanko, partner and managing director of the Asia-Pacific region at international management consulting firm Oliver Wyman, said capital account liberalization will make China an integral part of the global financial market and the global economy.
According to Kotanko, the yuan's depreciation was "quite normal" after a long period of appreciation. "The role of the yuan is clearly increasing, in all aspects of trade, investments, and the path is clear that it will be one of the main global currencies."
"China is still a dominant part of the world economy. Therefore it should also have its fair share as a reserve currency, a trade currency and an investment currency," he said.
In the speech, the premier called for foreign direct investment to play a key role in China's economic development.
"The nation will continue to lower the market access threshold for foreign direct investment," he said, adding that the goal was to make the country the most attractive FDI destination in the world.
According to the premier, more sources of capital, including foreign capital and private capital, need to flow into the real economy to stabilize economic growth. Risk management needs to be improved to prevent regional and systemic financial crisis, Li said.
