China banker says yuan to be liberalised: report

BEIJING : China is likely to significantly loosen its grip on the yuan in the next few years as Beijing seeks to make th

Published June 3, 2011 Updated June 3, 2011 06:53am

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By Syed Murtaza Gheblehzadeh

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China Construction Bank chairman Guo Shuqing, who some analysts have tipped as a possible future central bank chief, said the yuan could become convertible under the capital account in five years, the Wall Street Journal said.

"That doesn't mean there's no regulation, but cross-border transactions could be normal like other countries," Guo told the newspaper in an interview.

China Construction Bank is one of the country's "big four" banks.

Beijing currently strictly controls the flow of yuan in and out of China to protect the country from speculative investors and turbulence in the global economy.

Overseas investors require state approval to swap foreign currencies for yuan to make investments in China while domestic companies and individuals also need special permission to convert yuan for major projects abroad.

In recent years Beijing has relaxed its limits on the convertibility of the yuan in its push for greater use of the Chinese currency abroad.

The country has signed currency swap arrangements with several nations and launched trials for yuan trade settlement with a number of mainly Southeast Asian countries.

Yuan-related financial products have also been booming in Hong Kong, a semi-autonomous Chinese territory, which has been acting as a test bed for Beijing's ambitious goal to turn the unit into a global currency.

Guo, who previously headed the central bank's division that manages China's giant foreign-exchange reserves, also expressed confidence in the dollar given the ongoing sovereign-debt crisis in Europe.

"The US will always be the best option, or at least a relatively good one, to put our money" into thanks to its strengths as an innovation-led economy, he said.

China's foreign exchange reserves, already the world's largest, soared to a record $3.0447 trillion at the end of March.

The bulk of the money is parked in the low-yielding but relatively safe US Treasury bonds but since the global financial crisis China has been investing a a growing portion in euro-denominated assets.

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