People's Bank of China Governor Zhou Xiaochuan made comments this week that suggest some imminent reform announcements are on the agenda. There are two potential policies to look for in the near term: the loosening of foreign investment restrictions and the launch of domestic oil futures.
A new oil futures contract in the Shanghai free trade zone might sound trivial, but it could be the first step in removing capital controls on remittance of foreign investors’ profits. The contract would likely be denominated in yuan, attracting foreign investors in a program similar to the stock and bond connects. What could be even more interesting is if the PBOC waives capital controls for foreign participants, and the State Administration of Foreign Exchange allows foreign investors to wire capital gains to offshore accounts.
