City mayor plans to expand currency's products
Shanghai's mayor said Sunday the local government will focus on expanding yuan products and tools to push forward the currency's internationalization.
"As cross-border use of the yuan has increased and the currency's use internationally has expanded, we will actively adapt to this trend," Yang Xiong told the Lujiazui Forum in Shanghai on Sunday.
Shanghai is set to play a crucial role in the yuan's rising international use, but structural reforms on the national level are still needed, analysts said, noting that the process has slowed in recent months and there is still a long way to go before the yuan becomes a "true international currency."
Shanghai will expand yuan products and tools, improve cross-border payments and the clearing system to increase the global influence on the price of the onshore yuan, Yang said.
Shanghai will step up efforts to make itself the global yuan benchmark price center, assets pricing center and payments and clearing center, he added.
Through the Shanghai Pilot Free Trade Zone, the city will also further implement financial reforms and opening-up, the mayor said. Shanghai will further promote yuan capital accounts convertibility, expand the cross-border use of the yuan and broaden the opening of the financial services sector.
Hosted by the Shanghai government, the People's Bank of China, the China Securities Regulatory Commission and the China Insurance Regulatory Commission, the Lujiazui Forum is held annually to discuss the world's major financial issues.
While these efforts would help push the yuan's internationalization, more concrete measures are needed in three areas, and Shanghai is key to these measures, said analysts.
"A stable yuan-denominated bonds market, an open stock market and yuan-based pricing mechanism for commodities futures are three key areas for the yuan's internationalization," said Xu Hongcai, director of the China Center for International Economic Exchanges' Economic Research Department.
Based on previous yuan-denominated bonds, China needs to further expand the market, diversify offerings and further relax scrutiny over foreign participation, Xu told the Global Times on Sunday.
Efforts should also be pushed to establish an international board on the A-shares market to further open the stock market to foreign investors, he said. China should likewise quickly establish the long-discussed global energy center in Shanghai to promote the yuan-based pricing of commodities such as oil to boost the currency's influence, Xu noted.
While Shanghai plays a vital role in these efforts, there are some things that "it cannot do by itself," said Dong Dengxin, director of the Finance and Securities Institute at Wuhan University of Science and Technology.
"Although the yuan's internationalization sets the tone for Shanghai to become an international financial center, it is much bigger than that," Dong told the Global Times on Sunday. "Shanghai cannot accomplish this alone."
The currency's internationalization requires further structural reforms and the opening-up of the financial market, which requires a push from the central government, Dong said, noting the process will also be affected by policies in other countries.
Dong said the yuan's internationalization process has slowed down since last summer's volatile stock market because of measures taken by the Chinese government to stabilize the financial market and the yuan's exchange rate.
Dong was referring to efforts to stabilize the market and adjustments made to the yuan's foreign exchange central parity rate system, which was followed by a series of devaluations against the US dollar.
Although these measures were necessary at the time, they hurt foreign investor confidence and slowed down the process of yuan internationalization, Dong said.
"To become a true international currency, the yuan needs to be a reserve currency for foreign governments, and that will take more time," Dong noted.
