The discussion in China on capital account liberalisation, a major precondition for internationalising the renminbi, has intensified after the PBC released a new blueprint for accelerating the opening up of China’s financial sector. A senior central bank official gave an interview to the China Securities Journal on 24 February, outlining a three-step plan for liberalising the capital account over the next ten years. The first three years would see a loosening of direct investment controls and a liberalisation of capital flows out of China. The next three to five years would see deregulation of commercial credit controls and an increase in foreign renminbi-denominated lending by Chinese banks. And within five to ten years, China would ‘gradually open up trading of real estate, stocks and bonds to foreign investors’. By the end of this process, China would have achieved a great (and yet unspecified) degree of convertibility of the renminbi.

This announcement can be seen as an affirmation of the PBC’s irreversible goal of internationalising the renminbi, despite increasing domestic debate. It can also be seen as an attempt to change the perceived Chinese approach of ‘muddling through’ these issues. And finally, it suggests the strategic time for China to open up its capital account is now, and that the risks of opening up are controllable. Making the plan public was certainly also a test to gauge public sentiment on this matter — with the responses including both applause and anger.

via Is China ready to open its capital account? | East Asia Forum.