Yuan to "gradually" become convertible

[Riceball]

https://www.fxstreet.com/news/forex-news/article.aspx?storyid=e1699ce9-bce8-4239-be98-f3fb8b207084

Long and short: Bloomberg polled 1200 investors/economists on the Yuan and came to the conclusion that it would be fully convertible (ie tradeable on the open market) by 2016. So what, its a survey? Well, PBOC has come out and said that the Yuan will "gradually" become fully convertible. Again, so what, this is the PBOC we are talking about?

What are your thoughts on this? It will no doubt mean that the Yuan will become a global reserve currency; unlocking China's exchange reserves and ridiculous levels of public and private savings. Could be a solution to the global imbalances created by the US' reluctance to reign in its trade deficit while being the world's bank.

I also realise that this is another economics thread that will probably be looked at, lol'd at, and forgotten within the space of 24 hours. But hey, we can't always talk about religion or the lolage that is American politics

[Rathma]

Time to learn Chinese.

What does fully convertible mean though?

[tjanuranus]

Time to learn Chinese.

What does fully convertible mean though?

OMG i thought your name was RAMTHA. I thought i had run into my first real life Ramtha follower. Then i noticed it wasn't...
lol

[Rathma]

I'm probably the closest thing to a Ramtha follower here though

[Riceball]

Thanks for trying guys lol.

Fully convertible = able to be openly traded on markets. At the moment, as far as I'm aware, the PBoC keeps a the supply of Yuan very tight in order to manipulate the value and peg it to the US dollar; articificially low if you believe many economists. This makes Chinese goods much more competitive on price on world markets, pushing up their import volumes and creating demand for new plant and equipment in their home country thereby driving their economy to industrialise.

I'm of the view that this growth strategy is reaching its used by date, and so China will need to shift its focus towards building domestic markets and encouraging consumption rather than growing through business investment and exports. Floating the exchange rate (or making it fully convertible for those following at home) will speed this process up as it would reduce the prices paid for imports by Chinese wholesalers and consumers and boost their standards of living. There's alot more to add there if anyones interested.