China Communist Party Proposes Yuan Convertibility by 2020

  • Considering adopting `negative list' currency system: Xinhua
  • Will push for yuan's inclusion in IMF's reserve basket

China will seek to increase the yuan’s convertibility in an orderly manner by 2020 and change the way it manages currency policy, according to the Communist Party’s next five-year plan.

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The authorities will opt for a “negative list” foreign-exchange system -- an approach that lets companies do anything that’s not specifically banned -- and open the finance industry as it promotes the yuan’s inclusion in the International Monetary Fund’s Special Drawing Rights basket, the official Xinhua News Agency reported. China’s leaders were preparing to announce a 2020 deadline to dismantle currency controls, according to people familiar with the plans.

China has pushed to bolster global usage of the yuan before an IMF review of its reserve-currency basket as early as this month. The Communist Party plan also called for reforms in the issuance of stocks and bonds and the speeding up of an overhaul of the nation’s financial and taxation systems.

“The time-frame for yuan convertibility is well expected,” said Nathan Chow, an economist at DBS Bank Hong Kong Ltd. "For the yuan to be freely usable, China needs to further improve its financial system, including banking, stock and bond markets. All these reforms take time."

The 13th five-year plan is poised to be the first to confront an era of sub-7 percent economic growth since Deng Xiaoping opened the nation to the outside world in the late 1970s. The proposals coincide with heightened anxiety over China’s economic outlook following a stock market slump and a surprise yuan devaluation in August that roiled global markets.

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