Shanghai Should Be Pricing Center for Yuan-Denominated Products, PBOC Says

Shanghai should become the pricing center for yuan-denominated financial products, Zhang Jianhua, director of the research department at the People’s Bank of China, said today.

“We should develop Shanghai’s foreign-exchange market to match expansion of yuan use overseas,” Zhang said at a conference in Shanghai today. “We should try to control price setting. Strong growth in an offshore yuan market might influence the currency’s onshore price.”

The speech was referring to the price-setting of yuan- related financial products, Zhang said later in comments to Bloomberg News.

China is seeking to allow the yuan to rise to appease foreign criticism, while protecting exports and preventing a further slowdown in economic growth. Gross domestic product increased 10.3 percent in the second quarter, compared with an 11.9 percent gain in the previous three months, the statistics bureau said on July 15.

Twelve-month non-deliverable forwards strengthened 0.3 percent to 6.6928 per dollar yesterday in Hong Kong, reflecting bets the currency will strengthen 1.3 percent from the spot rate of 6.7803, according to data compiled by Bloomberg.

China should seek to expand convertibility of the yuan, which would help to build Shanghai into a global financial center, Zhang said at the conference held by the International Finance Research Institute of Shanghai Finance University. The Shanghai market should expand trading of yuan forwards and swaps, and introduce options and swaps at an appropriate time, he added.

Basket Rate

The People’s Bank of China said July 22 it may start to publish the yuan’s exchange rate measured against a basket of currencies rather than just the dollar. It will help shift the market’s attention away from the rate against the dollar, central bank Deputy Governor Hu Xiaolian said in a statement on the agency’s website.

The yuan’s effective exchange rate “should gradually become a reference” for policy, she said.

The yuan has gained 0.7 percent since the central bank said June 19 it will allow greater flexibility in the exchange rate, ending a two-year dollar peg.

Overseas sales jumped 43.9 percent in June from a year earlier to $137.4 billion and the surplus more than doubled to an eight-month high of $20 billion, the customs bureau said July 10.

--Judy Chen, Belinda Cao. Editors: Jim McDonald, Mike Millard

To contact Bloomberg News staff for this story: Judy Chen in Shanghai at +86-21-6104-7047 or xchen45@bloomberg.net.

To contact the editor responsible for this story: Paul Tighe at +61-2-9777-8626 or ptighe@bloomberg.net.

%CNY

• Tweet
• More
  • Business Exchange
  • Buzz up!
  • Digg
• Print
• Email