China aims to make yuan convertible

Updated: 2010-07-31 09:33
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BEIJING - The ultimate goal of China's exchange rate reform is to make the yuan a fully convertible currency, Yi Gang, head of the State Administration of Foreign Exchange (SAFE), said Friday.

Yi, also deputy governor of the People's Bank of China, the central bank, made the remarks in an interview with Caixin media's China Reform magazine, which is posted on the SAFE website.

"There is no official timetable for a convertible yuan," he said in the interview with the magazine's executive editor Hu Shuli.

The Chinese currency, or the RMB, still shoulders the pressure of appreciation albeit the pressure has eased, as the value of the currency drew close to the equilibrium level after adjustments in the past decade, Yi said.

There is no foundation for the yuan to move sharply, according to Yi.

China can maintain a flexible exchange rate and make the currency stand at a basically reasonable and balanced level, he said.

He added that since China is a large country and its development is unbalanced, the issue becomes more complicated.

"Generally speaking, a convertible currency is one whose exchange rate can float freely," he said.

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Asked whether the yuan may turn into a reserve currency, Yi said it depends upon the market demand.

"We should not push it hard. Do not be talked into the belief that the yuan is very close to a reserve currency. It, in fact, lags far behind that level," Yi said.

China abandoned a decade-old peg to the U.S. dollar five years ago by allowing its currency to fluctuate against a basket of currencies and appreciate by 2.1 percent.

Since then, the yuan has strengthened further, though slowly, and has risen more than 21 percent against the greenback.

On June 19 this year, the Chinese central bank announced that it would further the reform of the yuan exchange rate mechanism to improve its flexibility.