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Beijing to make yuan fully convertible by 2015
EU Chamber of Commerce in China President Davide Cucino says China is ready for the historic step. Convertibility is crucial to attract foreign capital, which is increasingly deserting Chinese markets. Beijing also plans to make London the yuan’s main European trading hub.
Beijing (AsiaNews) – The yuan will achieve “full convertibility” by 2015, EU Chamber of Commerce in China President Davide Cucino said, citing officials of the Communist regime. Over the next few years, Beijing will put into place a gradual plan to reach full convertibility of its currency, which is currently undervalued by as much as 35 per cent according to some analysts. Chinese officials have also said that London would become an offshore trading centre for the yuan.
Such a move would deflect more criticism from the United States and Europe, who blame the world’s second economy of unfair trading behaviour. For Washington and Brussels, Beijing has unfairly favoured its exports by keeping its currency undervalued. In fact, the yuan’s daily rate is not set by markets but by China’s central bank, the People’s Bank of China. A non-convertible yuan favours exports and penalises imports.
In the past year, the yuan did gain 6.4 per cent, touching a 17-year high of 6.3705. However, far from doing others a favour, the adjustment had become necessary to attract foreign capital at a time when foreigners are increasingly disinclined to invest in a rigid, high inflation Chinese market.
“Making the yuan fully convertible will lead to foreign inflows into China and a stronger yuan,” said Sacha Tihanyi, a Hong Kong-based senior currency strategist at Scotia Capital. “Making the yuan fully convertible is also the key step in pushing it as a reserve currency and enhancing its use in global trade.” As part of this plan, London could become an offshore trading centre for the yuan.
In his meeting with UK Finance Minister George Osborne, China’s Deputy Premier Wang Qishan confirmed the commitment.
If implemented the plan would enable the British capital to join centres like Singapore and Taipei vying for a share of the growing offshore yuan business.
Analysts are sceptical though that London could usurp Hong Kong's pole position as an offshore yuan centre and a gateway to the mainland.