China to promote capital opening 'step by step'

BEIJING -- China will promote the convertibility of renminbi under capital accounts step by step, although the yuan's increasing cross-border use will accelerate the process, People's Bank of China governor Zhou Xiaochuan said Wednesday.

"Making the yuan convertible under capital accounts is quite complicated," Zhou said at a press conference held on the sidelines of parliament's annual session.

He said a convertible yuan under capital accounts would not only help the yuan's internationalization, but also boost the building of an open market economy in the country and strengthen domestic and foreign investors' confidence in the Chinese currency.

Zhou noted the global financial crisis has offered a special opportunity for the rapid growth in the yuan's cross-border use in trade and investment due to both the crisis of confidence in the world's major currencies and closer regional cooperation.

According to the PBOC governor, making the yuan a freely convertible currency has been a long-term policy for China since 1993.

"Regardless of the yuan's internationalization, we will gradually make the yuan convertible under capital accounts," he said.

A currency trading pilot program in Qianhai business zone that borders Hong Kong in southern Guangdong province is set to facilitate the opening of China's financial market.

The Chinese government unveiled measures in December for companies in the Qianhai zone to borrow yuan loans from Hong Kong banks with interest rates and tenors to be fixed independently.

Currently, the yuan has become convertible under the current accounts but capital accounts are still controlled by the state.