China will propose a plan this year to allow yuan capital-account convertibility as part of measures to loosen controls on its currency and interest rates, the nation's Cabinet said.
The yuan plan will also include creating a mechanism that allows investments overseas by individuals, the State Council said in a statement on Monday after a meeting led by Premier Li Keqiang on the focus of economic reforms in 2013.
Other measures include improving controls on risks from local government debt, expanding trials of value-added taxes on companies and pushing forward changes to the country's household-registration system.
Li in March pledged to open the economy to more market forces and strip power from the government as part of efforts to restructure growth. China needs to sacrifice short-term economic growth for structural adjustments, central bank Governor Zhou Xiaochuan said in April after the nation reported slower-than- forecast first-quarter expansion.
"It's a positive sign that the new government under Li Keqiang is trying to boost growth by reform instead of launching fiscal stimulus," Shen Jianguang, chief economist at Mizuho Securities Asia Ltd in Hong Kong, said by telephone. The goal of a feasible plan for capital-account convertibility shows that the reform ideas promoted by Zhou Xiaochuan have received endorsement from the cabinet.
The State Council statement did not give additional details on the capital-account plan.
A March statement by the State Council also said the nation would roll out measures to promote interest-rate and exchange- rate liberalisation this year. That statement did not mention a plan for capital-account convertibility.
The yuan fell in Hong Kong’s offshore market by the most in 15 months on Monday and the onshore spot rate retreated from a 19-year high after China’s foreign-exchange regulator issued measures to step up scrutiny of cash transfers from abroad. (Bloomberg photo)
Yuan Falls
The yuan fell in Hong Kongs offshore market by the most in 15 months on Monday and the onshore spot rate retreated from a 19-year high after China's foreign-exchange regulator issued measures to step up scrutiny of cash transfers from abroad.
China reported economic growth of 7.7% for the first quarter, trailing the 8% median forecast in a Bloomberg News and the 7.9% pace for the last three months of 2012. The nation in March set a target for 7.5% expansion this year.