China set to internationalize yuan & open financial markets – head of People’s Bank
Beijing is set to further internationalize the yuan, including through the opening of the country’s financial markets, according to the Governor of the People’s Bank of China (PBC) Zhou Xiaochuan.
“We have taken sufficient measures in the process of internationalization of the yuan which from now on will allow the yuan to be used in trade and investment,” Xiaochuan said at a press conference on Friday. “Moreover, the yuan has been included in the SDR currency basket. The key procedures have already been carried out.”
The SDR (Special Drawing Rights) is an international asset created by the International Monetary Fund (IMF) in 1969 to supplement the national currencies of its members. The SDR’s valuation is based on a basket of major international currencies reviewed by the IMF every five years. China’s yuan made it to the basket in October 2016 for the very first time. The move was welcomed by the PBC back then, which described it as recognition of the country’s reforms and development.
China is seeking to further open its financial markets in order to strengthen the international position of yuan and to encourage usage of the national currency abroad. While “some restrictions” are still in place, Beijing is set to remove them “gradually,” the official stated.
“Now that we have entered a new stage, we can be bolder about increasing market access and a higher degree of opening to the outside world,” Xiaochuan said. “We cannot force anyone, decisions are made based on their own logic, that is why it is a gradual process. We will continue gradual internationalization of the yuan.”
Beijing has managed to get a grip on the country’s soaring debt levels and has entered a period of stabilization, the official stressed, describing the improvement in China’s financial climate as a “clear trend.” Such progress is expected to further bolster the yuan’s international standing, as well as to loosen the regulatory grip of the government.
“Fast debt growth has stabilized,” Xiaochuan said. “Generally speaking, we have entered a stage of stabilizing and gradual lowering of the leverage ratio.”
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