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INTRO
Chinese Premier Wen Jiabao has called for the government to push forward financial reforms set to open up the Chinese market further to foreign investment and private funds... As well as loosen control over the yuan.
He made the remarks on Monday during a tour of the country's central bank.
For three deacdes, China's economy has been powered by the mantra "reform and opening up," which led to rapid industrial development.
Now, as China enters a new stage of development, "financial reform" is the new buzzword, for the world's second largest economy.
On an tour of the People's Bank of China, Premier Wen Jiaobao said efforts market reforms of interest and exchange rates must be pushed forward in the near future, to make the yuan convertible...
Including expanding renminbi cross-border trade and investment.
China's cross-border capital flow is currently centrally-controlled, with its capital account only partially convertible... Preventing the yuan from being used as a global, reserve currency.
The order follows other reforms to ease capital controls, including more flexible interest rates and the adoption of a wider floating band for the yuan, against the U.S. dollar.
Wen also urged the government to encourage financial innovation and boost the role of private financial institutions... Including investment banks.
But said to prevent the kind of financial crisis seen in the West, the central government must still play a key role, in managing financial risks.
Risks which have already emerged - including sour loans to local government and property speculation.
To test its regulation over underground private financing last year, the government set up a pilot "financial reform zone" in the eastern property boom-town of Wenzhou...
The special financial zone will encourage private capital and financial reform under state supervision - and in a limited region...
But the model is not unlike the special economic zones developed in the 1980's, to attract foreign investment into Chinese manufacturing... Beginning in Shenzhen.
And if the Wenzhou financial trial proves a success, financial reform - like China's market reforms - could catch on quickly...
