Deregulation also necessary to carry out financial reforms.
People’s Bank of China Governor Zhou Xiaochuan said the renminbi's convertibility will be the next step in reforming China's exchange rate system.
“For the central bank, I think the next movement related to the yuan is going to be reform of convertibility,” Zhou said. “We are going to realize it, we are moving in this direction, we need to go further, we will have some deregulation,” he said.
The exchange rate overhaul is part of China's plan to promote freer movement of capital in and out of the country for investment purposes and to make the exchange rate more market based. China is seeking to boost the use of the renminbi or yuan in international trade and finance to eliminate the US dollar’s global dominance and reduce its own reliance on the US dollar.
Analysts said China's new political leadership may liberalize interest rates and push to make the renminbi fully convertible within five years as part of an overhaul that will revolutionize the country’s financial system.
The renminbi has appreciated about 33% against the US dollar since the revaluation in 2005. It had its biggest weekly gain in a month last week, closing at 6.2356 per US dollar in Shanghai on Nov. 16.
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