China's central bank chief poured cold water on Thursday on talk that Beijing could make the yuan fully convertible as soon as 2015.
People's Bank of China Governor Zhou Xiaochuan said the ruling Communist Party's economic plan for 2011-2015 included the goal of scrapping restrictions that mean the yuan cannot be freely traded for purposes other than trade and investment.
But, speaking to reporters in London, Zhou added: Up to now, the plan does not define a clear timetable for full convertibility.
He was commenting on media reports that quoted the president of the European Union Chamber of Commerce in China as saying he had been told by Chinese officials that Beijing would make the yuan fully convertible by 2015.
China has been promoting the international use of the yuan in trade for the past two years to reduce the country's reliance on dollar financing. A thriving market in yuan-denominated bonds and deposits has sprung up in Hong Kong as a result.
This has led some commentators to conclude that China would speed up efforts to meet its long-standing goal of making the yuan, also known as the renminbi, freely convertible.
Mark Williams, chief China economist at Capital Economics in London, said he was highly sceptical of the 2015 timeline.
Full convertibility would require both that the renminbi first appreciates to around its fair market value and that the government is comfortable allowing conditions in its banking sector and financial markets to be dictated in part by foreign investors. Neither seems likely, he said in a report.
NO URGENCY ON SDR
Zhou is part of a government delegation visiting London for regular talks. Vice-Premier Wang Qishan, who has responsibility for economic and financial policy, is leading the delegation.
The central bank chief said China saw no special urgency in having the yuan included in the basket of currencies that make up the Special Drawing Right, the International Monetary Fund's in-house unit of account.
But Zhou said he welcomed discussion of the idea as part of the search for ways to improve the functioning of the global financial system.
The SDR comprises the dollar, euro, yen and sterling. Under current IMF guidelines, the yuan is not eligible for inclusion in the basket because it is not convertible.
Turning to the global economy, Zhou said tackling imbalances required a concerted effort by all the major economies in the world and said the Group of 20 major advanced and emerging economies was a good forum for such coordination.
Finance ministers and central bankers of the Group of Seven (G7) developed nations, which does not include China, meet in France this weekend to discuss the global economy. Zhou did not mention the G7 meeting.
Even as they coordinate, each country should act to sort out their own domestic imbalances, he said. For its part, China was working to boost domestic demand, Zhou added.
Asked how China would respond to further quantitative easing by the Federal Reserve, the U.S. central bank, Zhou said he understood that the United States needed to secure an economic recovery.
But he added: There should be coordination and, when setting monetary policy, countries should consider the impact on global liquidity.
China and other emerging economies criticised the last round of U.S. quantitative easing as destabilising for global markets.
Zhou said China welcomed London's aspirations to become an offshore trading centre for the yuan but said the city appeared to be moving faster than we expected and the market would ultimately decide.
Internationalising the yuan was a long-term process of exploration and experimentation, he said.
He said any move by London to trade the yuan would not affect the status of Hong Kong as an international centre because the territory had strong markets and played an important role in China's development.