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Central Bank Vows Further Reform

China's central bank said on October 13 it was committed to expanding and liberalizing the yuan foreign exchange market and introducing more derivatives, but refrained from specifying a time frame for these reforms.

China will allow an over-the-counter market in the yuan, Wang Yu, director of foreign exchange and gold market division at the People's Bank of China, told a derivatives seminar in Singapore.

China's yuan is mainly traded on the China Foreign Exchange Trade System, which is a unit of the central bank and the sole operator of the country's interbank markets.

An over-the-counter market would enable banks and brokers to trade yuan over the phone and other electronic trading platforms.

China ended an 11-year system of virtually pegging the yuan to the US dollar in July. While the yuan has moved in tight ranges since the revaluation, China has announced measures such as allowing more banks to trade yuan onshore forwards and permitting interdealer brokers.

China would expand the currency market by first permitting non-banking financial institutions to trade the currency, and subsequently, by extending it to non-financial enterprises.