Forex opening could internationalize yuan

By Song Shengxia and Li Qiaoyi in Dalian Source:Global Times Published: 2015-9-12 0:03:01

China's decision to open its onshore foreign exchange market to overseas central banks shows China's determination to push ahead with the yuan's internationalization and the IMF will consider including the yuan into its official currency reserve basket if it meets all the requirements, an IMF official said Friday.  

Premier Li Keqiang said on Thursday at the opening ceremony of Summer Davos that China will allow overseas central banks to directly access its onshore foreign exchange market.

This clearly demonstrates China's commitment to moving forward to reform the exchange-rate mechanism and make the yuan more market based, Zhu Min, deputy managing director of the IMF said Friday on a discussion panel at the annual summer meeting of the World Economic Forum in the port city of Dalian.

China's decision to allow overseas central banks to access its onshore foreign-exchange market and further loosen grips on cross-border yuan two-way cash pooling will help boost the yuan's adoption as a reserve currency as well as its usability as a settlement currency and consequently slightly ease the yuan's depreciation pressure, according to the latest research report by China International Capital Investment.

China's central bank announced last month to change the method for setting the yuan's daily reference rate, which led to a sharp depreciation of the yuan and triggered concerns that the country's economy may have slowed down than expected.

"There's a lot of noise about the 2 percent devaluation [of the yuan,] but 2 percent is very little, really. Compared to the Japanese yen's loss of 50 percent over 18 months, so I think there's been overreaction to the [Chinese] currency movements," Henrik Ekelund, president and CEO of Switzerland-based BTS Group, told the Global Times on the sidelines of the forum.

Justin Lin Yifu, former chief economist of the World Bank, also said at the same discussion panel that China is on track to achieve around 7 percent growth not only in 2015, but also for the next five to 10 years, which would contribute a quarter or more of global growth.

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