China is taking steps to make doing international business within it’s borders a bit easier.

China is considering a dramatic relaxation of its capital controls over the next few years as part of an accelerated push to make its currency freely tradable.

With Beijing pressing for a bigger international role for its currency, speculation is swirling about when it will fully open its capital account. This reform would allow businesses, investors and individuals to trade the renminbi across China’s borders with no significant barriers, a liberalisation necessary for the Chinese currency to emerge as a global rival to the dollar.

A two-step process has been laid out for this move: First basic limited exchanges and then finally full capital convertibility. So far, China has taken a gradualist approach, issuing limited quotas for cross-border investments by institutions and placing strict caps on the amount of currency that individuals can exchange.

Zhou Xiaochuan, the central bank governor, said: “China‘s willingness and determination to strive toward this objective [of capital account convertibility] are very clear.”

And that’s good news for global business.

More from the FT here.

This interactive graphic explores how China’s real and nominal exchange rates against its main trading partners have fluctuated over time using data constructed by Eswar Prasad, professor at Cornell University and a senior fellow at the Brookings Institution. See more here.

This interactive graphic explores how China’s real and nominal exchange rates against its main trading partners have fluctuated over time using data constructed by Eswar Prasad, professor at Cornell University and a senior fellow at the Brookings Institution.
See more here.

 

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