Capital account open or gradually approaching

This reporter Lu Ying in a short period of half a month, the central bank's top level on the remit change seven times position.　　Since July 15, Hu Xiaolian, the central bank's deputy governor, issued 5 consecutive signed articles, during which the Director of State administration of foreign exchange, Yi Gang and Hu Xiaolian, also received media interviews to reform the reform. Analysts believe the move suggests that the central bank is increasing openness to the exchange rate regime and a picture of currency policy reform.　　High-level statements indicate that the transfer path has been clear, renminbi capital under the convertibility is also gradually approaching.　　To help the market understand the topics of these intensive issues include: floating exchange rate system is China's basic state policy, the ultimate goal of the exchange is to achieve the convertibility of the renminbi; the flexible exchange rate system helps to enhance the effectiveness of monetary policy, and the combination of factor price and exchange rate adjustment helps China's economic balanced development "The frequent dispatch of the central bank is to ease domestic pressure, to help the market fully understand the reform and stabilize market expectations."　　A person in the foreign exchange bureau said to the Chinese securities News reporter. The central bank announced June 19 to further promote the reform of the RMB exchange rate regime and strengthen the RMB exchange rate flexibility.　　In this regard, some people believe that enhanced exchange rate flexibility will damage the export industry, resulting in increased unemployment, there may be "hot money" inflow risk. "It is normal for the renminbi to fluctuate within 5%-10%, but many companies now say that a 1%-3% rise in the renminbi is a big loss." If so, there is no way to talk about a floating exchange rate mechanism.　　"Chen Bingcai, deputy director of the decision-making consulting Department of the National Administration Institute, said. In fact, since the transfer, the two-way fluctuation of RMB exchange rate has obviously strengthened, and the market has obviously lowered the appreciation expectation of RMB. As of August 3, the renminbi closed against the dollar at 6.7734, rising 8 points from yesterday, rising for the 7th consecutive session.　　But in the middle price, the renminbi has risen only 0.78% against the dollar since the exchange was restarted.　　Roughly, in the 1.5 months of the reset, the renminbi rose against the dollar in three weeks and fell three weeks, but in fact 0.78% of the increase was mainly in the first two weeks after the transfer, and the cumulative gain for the entire July was only 0.1%. In the short term, analysts say, the current route to change is a steady appreciation, gradually allowing the market to guide the exchange rate rather than the rapid appreciation of the exchange rate. In the long run, we should establish a managed floating exchange rate system based on market supply and demand and reference a basket of currencies. Central bank governor Zhou Xiaochuan previously disclosed that the dollar, the euro, the yen and the won were the 4 main currencies of the "basket", Singapore dollar, Sterling, Mayuan, rouble, Australian dollar, Thai baht and Canadian dollar were the 7 minor currencies of the basket.　　But the pattern of a basket of currencies lacks tangible transparency, weight effectiveness and framework execution. Associate Professor, Department of International Finance, Fudan University, China believes that a basket of currencies must address two technical issues, one is the type of currency in the basket, and the other is the weight of the renminbi on each currency in the basket. The real problem is to establish an effective RMB exchange rate index, referring to the RMBEffective exchange rate index, which determines the renminbi's exchange rate against the dollar.　　At present, both the BIS and the IMF have announced effective exchange rate indices, but the central bank must disclose its own effective exchange rate index, the choice of basket currency, the choice of exchange rate weights should be determined by the central bank itself. The goal of RMB exchange rate reform is to realize the convertibility of RMB, and the current project has been liberalized but the capital account is still partly controlled.　　Although Yi has reiterated that there is no official timetable for convertibility, he has been more or less in the open direction of capital projects throughout the recent series of policies adopted by the Foreign Exchange Bureau.　　Authorities say the process of opening the capital account should be a first-time, long-term, short-term, and currently open capital account.　　Last year, the Foreign Exchange Bureau intensively issued 3 foreign Exchange Management regulations, including foreign direct investment of domestic institutions, the new rules, in June this year again, the decentralization of 10 capital project foreign exchange business approval rights, to trade facilitation and promotion of foreign investment for the purpose of opening up capital projects first.　　Since last year, the central bank's efforts to promote the internationalization of the renminbi, the creation of international boards on the agenda, the renminbi can be exchanged for substantial progress in the voice is also increasing. The Foreign Exchange bureau Personage said, the renminbi convertibility is the renminbi internationalization premise, along with the renminbi international trade settlement development, the Non-resident holds the renminbi settlement account to have the obvious capital account nature, this will have the big impact to the non-resident, in particular the institutional holding renminbi account foreign exchange management,　　It is necessary to establish RMB offshore trading market both inside and outside China. Indeed, the recent pace of construction of an offshore renminbi centre in Hong Kong has accelerated markedly. The People's Bank of China and the Hong Kong Monetary Authority signed a revised memorandum of understanding July 19 on the expansion of the renminbi trade settlement arrangement, and signed the amended Renminbi Business settlement agreement with BOC Hong Kong.　　The deal is seen as a "big loosening" of the renminbi's circulation in Hong Kong, and the exploration of the renminbi's backflow regime, including the small QFII, is expected to be launched soon. There are also experts who remain cautious about opening capital projects.　　Yu Yongding, a former Central bank monetary Committee member, has called for capital controls to be the last line of defense for China's financial stability, and the convertibility of the renminbi should be the last step in all market reforms. Liu Yuhui, Director of China Economic Evaluation Center at the Chinese Academy of Social Sciences, said the domestic economy must have a soft landing if the renminbi capital project is to be convertible. "Domestic renminbi assets in all aspects of the price is much more expensive than foreign, two water levels formed a big gap." It is now being maintained through a berm of capital project control. If the restrictions on Chinese companies and residents ' purchases are lifted, there is bound to be capital outflows and the downward pressure on renminbi assets, which will have a contractionary effect on China's banking system and credit system. "Reform needs to be matched by reforms." Hu noted that the average daily volatility of the renminbi against the US dollar has exceeded 90 basis points since June 19, and that the average daily volatility of the RMB against the U.S. currency has increased by 70 per cent from July 2005 to July 2008.A number of basic points significantly expanded. The goal of the reform is to establish a mechanism to enable the exchange rate level to basically reflect the market supply and demand situation. The renminbi may expand against the dollar in the future.　　This stance is intriguing.　　However, experts pointed out that, although the goal of the reform is market-oriented, but at present the central bank-oriented, the effect of the exchange rate adjustment mechanism depends on the co-ordination of other policies. Chen Bingcai said that strengthening the renminbi's exchange rate flexibility and speeding up the internationalisation of the renminbi are technically not a problem. But the biggest obstacle is the additional conditions necessary for the RMB exchange rate formation mechanism, including the mechanism of resource price formation and the adjustment of export drawback policy. "These are not things that the central bank can push in the short term. Liu Yuhui pointed out that the reform of the exchange rate mechanism should be coordinated with the factor price reform, the exchange rate promotion will compress the profit space of the enterprise, and make the money from the Trade department form an effective supply and demand relationship in the non-trade sector. But now the non-trade sector is mainly state-owned assets control, after the exchange rate mechanism to adjust the outflow of capital can only turn to the virtual economy. Only "DPP", the private capital to achieve results, the goal can be realized.