2013-05-06

Prepare for the convertible yuan

For Yuan, Convertibility Countdown Starts Now
People's Bank of China Governor Zhou Xiaochuan recently said China's foreign exchange reserves are too high. A fundamental solution to the problem, I think, lies in making the yuan freely convertible and adding it to the basket of international reserve currencies.

I remain optimistic about the yuan becoming basically convertible during the 12th Five-Year Plan period. With the gradual opening of the nation's capital account, the establishment of an offshore yuan market, and reforms to the exchange rate and interest rate regimes, the yuan will become substantially more active in international transactions.

The yuan will see basic convertibility in 2015, laying a solid foundation for the currency to join the international reserve basket.

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