BEIJING, April 11 (NNN-XINHUA) -- China's foreign exchange regulator says it will advance the yuan's convertibility on the capital account in a stable and orderly way although it is not the fundamental goal of the country's foreign exchange reform.
It is a gradual process, and also a systematic project which needs the co-ordination of many departments to offset external impacts, the State Administration of Foreign Exchange (SAFE) said in a statement posted on its website Tuesday.
China has only allowed the yuan's convertibility on the current account so far. A fully convertible yuan is the prerequisite to making it an international reserve currency.
According to the statement, China will expand the use of the yuan in cross-border trade and gradually increase the channel for capital outflows.
The government will encourage eligible institutions to invest in foreign countries. It will also gradually open the domestic financial market and build up a system to ward against the impacts arising from free capital flows, the statement said.
The SAFE noted that it would closely monitor domestic and international economic operations, and keep the convertibility promotion measures in line with the micro-economic environment and financial supervision.
While partly loosening the restrictions, it will also improve oversight to safeguard the country's financial security.
China has been progressively and cautiously advancing the yuan's convertibility on the capital account. Since the start of the global financial crisis, China has signed currency swap agreements worth 1.5 trillion yuan with 17 countries and regions to support its trade and investment with these economies.
By the end of September 2011, the assets of foreign direct investment in China totalled 1.62 trillion USD while China's overseas direct investment stood at 345.5 billion USD.
By March 9, 2012, China had approved 24.55 billion USD of investment quotas for the Qualified Foreign Institutional Investors (QFII), and 75.25 billion USD for the Qualified Domestic Institutional Investors (QDII).
Meanwhile, Zhou Xiaochuan, the Governor of the People's Bank of China (PBOC), said Tuesday during a tour of Wenzhou that the city, being a pilot zone for financial reform, should encourage private capital to flow into its financial sector.
"Wenzhou should actively integrate local financial resources and strive to resolve prominent problems in its economic development," Zhou said.
The pilot zone should encourage and guide private capital to enter the field of financial services, ensure smooth access to investment channels for private capital and improve the financial services to small and micro-sized enterprises and the rural areas, according to the governor.
By carrying out the financial reforms, Wenzhou, a prefecture-level city in southeastern Zhejiang province, should effectively improve the capability of turning private capital into industrial capital, Zhou said.
In late March, China approved a plan to set up a pilot zone in the city -- which has a reputation for its entrepreneurial spirit -- to regulate private financing activities, after the city's private business owners turned to underground lenders last year. -- NNN-XINHUA