BEIJING May 20 In the latest advertisement of
China's currency ambitions, an official suggested on Wednesday
that the yuan could make up more than 3 percent of global foreign
exchange reserves by 2020.
The yuan CNY=CFXS is not convertible for purely financial
purposes, ruling it out as a reserve currency for now, but China
has started to carve out a bigger international role for its
A pilot scheme will start soon in Hong Kong to use the yuan
to settle trade with selected companies in southern Guangdong
province; China has signed yuan swap deals totalling 650 billion
yuan ($95 billion) since December with six central banks; and on
Tuesday two foreign banks said they had won permission to float
yuan bonds in Hong Kong. [ID:nSHA239335]
Zhang Guangping, vice-head of the Shanghai branch of the
China Banking Regulatory Commission, acknowledged that a series
of conditions would have to be met for the yuan
internationalisation trend to gather momentum.
China would have to gradually make the yuan convertible on
the capital account; it needed a more liquid foreign exchange
market; its bond markets and banking system needed to be more
developed; and there had to be proper monitoring of cross-border
capital flows, Zhang told a foreign exchange conference.
But, hypothetically, he said there was no reason why the yuan
could not account for over three percent of global reserves by
2020, the target date for Shanghai to have evolved into an
international financial centre.
That would mean the yuan displacing the Japanese yen as the
fourth-largest currency in reserve portfolios, behind the pound,
the euro and the dollar.
Zhang told reporters later his target was plausible, given
the rapid growth of China's economy and outbound investment and
its big share of world trade.
"We have the conditions to reach such a proportion," he said.
In late March, central bank governor Zhou Xiaochuan signalled
China's intention to play a greater role on the global currency
stage by proposing that the dollar be eventually replaced as the
dominant reserve currency by a beefed-up version of the Special
Drawing Right, the International Monetary Fund's unit of account.
(Reporting by Langi Chiang and Simon Rabinovitch; Writing by
Alan Wheatley; Editing by Jonathan Hopfner)