(Yicai Global) June 18 -- Shanghai is ready to take a step further towards the free exchange of currencies and unrestricted usage of the Chinese yuan, the governor of the country’s central bank said today.
So long as regulatory requirements on anti-money laundering, anti-terrorist financing and anti-tax evasion are met, normal trade and investment capital can freely flow in and out of the international financial hub, Yi Gang said at the ongoing Lujiazui Forum, where government officials, financial leaders and experts from around the world have gathered.
Shanghai will become a center for yuan-denominated financial asset allocation, Yi said, adding that global institutional investors will be able to easily carry out cross-border investment and financing activities in the coastal metropolis.
Shanghai will also become a risk management center for yuan-denominated financial assets, Yi said. Domestic and foreign investors need to continuously conduct risk diversification and management while holding yuan assets, he said.
The yuan interest rate is the lowest of all developing countries, but it maintains a high exchange rate with major currencies. This has made yuan assets highly attractive to overseas investors, Yi said.
The size of the central bank's balance sheet has stabilized at around CNY36 trillion (USD5.1 trillion) in recent years, unlike in other major economies where the central banks’ balance sheets are expanding greatly.
China's economic fundamentals continue to be sound and its monetary policies remain within normal range. The balance sheet of the country’s commercial banks continues to expand reasonably and loans maintain high growth, reflecting improved efficiency in monetary policy transmission and a well-functioning market mechanism, Yi added.
China’s monetary policy will continue to maintain a reasonably ample level of liquidity. An additional CNY20 trillion (USD2.8 trillion) in yuan loans is expected to be injected over the course of the year and the increase in social financing will exceed CNY30 trillion, Yi added.
Regulators will continue to guide market interest rates downwards, saving businesses as much as CNY1.5 trillion (USD211.9 billion) this year, he said.
Editor: Kim Taylor