Time right for China yuan convertibility -regulator

BEIJING May 16 (Reuters) - Conditions are "extremely favourable" for China to make the yuan freely convertible but some capital controls will be needed in a time of crisis, the country's top securities regulator said on Wednesday.

"Currently, conditions are extremely favourable for promoting yuan convertibility on the capital account", Guo Shuqing, head of the China Securities Regulatory Commission (CSRC), told an audience of financial regulators and industry executives.

Guo said China will take gradual steps towards freeing up the yuan and, even after making it fully convertible, may still resort to temporary capital controls to cope with volatile fund flows and crisis in balance of payments.

Beijing took a milestone step in liberalizing its currency regime last month, doubling the daily onshore trading band for the yuan to 1 percent. That took the country one step closer to its goal of a basically convertible yuan by 2015.

China has been promoting the international use of the yuan in trade for the past two years to reduce the country's reliance on dollar financing. A thriving market in yuan-denominated bonds and deposits has sprung up in Hong Kong as a result.

Sources in close, direct contact with the central bank and the CSRC, say reforms are ready to be rushed out over the next 12 months to boost two-way capital flows, drive diversification of business finance and accelerate corporate currency hedging.