China hints at a breakthrough in RMB full convertibility this year

HONG KONG – The Goveror of China’s central bank, the People’s Bank of China, Zhou Xiaochuan, has told delegates at the China Development Forum that Beijing will accelerate financial reforms and strive for full capital account convertibility within 2015. More measures will be taken to ease rules on two-way cross-border investment by individuals, and to open up capital markets more widely to make cross-border fund-raising easier, he said.

HSBC says the measures should increase the chance for the RMB to be included in the IMF SDR basket in the forthcoming review later this year.

In his address, Zhou highlighted three key aims – to make individual cross-border investment more convenient; to make capital markets more open; and to implement a new round of revisions to existing FX regulation.

HSBC says the address demonstrated Beijing’s strong commitment to accelerate financial reforms and to achieve full capital account convertibility in 2015. “As we have noted before, the speed of financial reform will likely exceed market expectations again,” the bank said. “We argued in 2014 that RMB wwould achieve full convertibility within the next 2-3 years. This was deemed to be too bold by many in the market. However, the PBoC governor's statement shows that the pace of reform towards full RMB convertibility is actually even faster, rather than slower, than our projection.” www.hsbc.com (ATI).