SDR move signals freer capital account
Print Edition
A Chinese central bank official said the inclusion of the yuan into the International Monetary Fund’s global reserve currencies basket is the starting point for deeper financial reforms, which include a greater liberalization of its capital account.
Xing Yujing, director-general of the No. 2 monetary policy department of the People’s Bank of China, told a news conference yesterday that the yuan’s admission into the IMF’s Special Drawing Rights basket would help improve price discoverability for the currency.
However, she noted the yuan lags behind other major currencies in terms of convertibility on the capital account and China still needs to open up its financial markets further.
“We will continue to push forward yuan convertibility on the capital account in a safe and orderly way, on condition that risks are under control,” she said.
The IMF included the yuan into its SDR basket on Monday.
China has pushed to make the yuan more international, setting up swap arrangements with countries so trade can be settled in the currency, and it has said it will push ahead with financial reform. China has widened the yuan’s trading band and this year went a long way to freeing up interest rates.
Some Chinese academics have warned against any rush to strip capital controls at a time when money is leaving the country amid jitters about China’s economic slowdown and likely US interest rate rises.
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