The chairwoman of China's Export-Import Bank on Saturday called for an acceleration of reforms to internationalize the Chinese currency, warning that external risks linked to rising global protectionism could harm the financial sector. Hu Xiaolian, speaking at a forum in Beijing, said some countries have been engaged in "constant" efforts to undermine globalization.
"Some barriers have been erected in terms of trade and investment, company cooperation, technological exchange, personnel exchanges and so on, which actually makes us worry whether the financial sector, as the 'blood' of the economy and an important support and guarantee for globalization, will also be impacted by this counter-current," Hu said. China is locked in a bruising trade war with the United States, which has led to retaliatory tariffs on hundreds of billions of dollars of each others' goods. The US administration has also stepped up scrutiny of Chinese firms, including telecommunications giant Huawei, which has been banned from accessing the US market and effectively limited from purchasing US technology.
Last week, the Washington Post reported that a US judge has found three large Chinese banks in contempt for refusing to comply with subpoenas in a probe into North Korean sanctions violations, adding one of them could lose access to the US financial system.
"Can international currencies, as the major global reserves for payment, settlement and investment, provide security for our global business activities and economic activities?" she asked. Hu said a changing environment in trade and investment suggests the country needs to plan better for potential trouble. "I think the internationalization of the yuan should move faster," Hu said. The internationalization of the Chinese currency suffered a setback since 2016 due to more stringent government controls to curb capital outflow as the yuan weakened.
Hu stressed the need to increase the overall competitiveness of China's financial sector as a pre-condition for a more international currency, including by boosting efforts to modernize its financial institutions, expand financial opening and innovation, and remove distortions in loan pricing. Hu said she was encouraged that China's central bank is taking steps to make its interest rates more market-oriented.
"More efforts need to be made in interest rate liberalization, as only by reducing controls on loan pricing through both obvious and non-obvious ways can we better reflect real demand and risks," Hu said. Ma Jun, a central bank adviser, said on Monday that he expects China will eventually abolish its benchmark lending rate, but did not give a clear timeline.
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