Annual report of China’s central bank stresses need to keep on with financial reforms

BOFIT Viikkokatsaus / BOFIT Weekly Review 2016/27

The People’s Bank of China’s 2015 annual report released last month emphasises reforms to further open up China’s capital markets and increase yuan convertibility. Initiatives include the QDII2 programme that would give qualified individual Chinese investors an opportunity to invest directly in international markets. Existing investment programmes are directed towards institutional investors and private investors are limited to investing overseas via fund management companies or banks. The exchange-rate mechanism will also be improved and markets are given a bigger role in setting interest rates.

The PBoC aroused international attention when it said it was considering the possibility of allowing trading of foreign firm shares in China. Qualified foreign firms would be permitted to issue depository receipts (a standard way for firms to issue shares outside their home countries). The central bank did not, however, give further details or a time frame for the reform plan.

The PBoC said that monetary policy will become more flexible, but more targeted this year. The PBoC characterises its monetary stance as “prudent,” a term it has used since 2011. The central bank also promised to improve communication to increase policy transparency.

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