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PBoC Signals Exit From FX Intervention; Vows Faster Yuan Reform

PBC 201113

The People's Bank of China will end normal intervention in the currency market and quicken the process of full yuan convertibility, Governor Zhou Xiaochuan reportedly wrote in a guidebook that details the reforms agreed upon during last week's Communist Party meeting.

The central bank will "basically" exit from regular foreign exchange intervention, he said in the book. The PBoC is also planning to widen the yuan's trading band "in an orderly way" while increasing the currency's two-way flexibility, according to Zhou.

China should seize favorable time window to speed up yuan convertibility on capital account, he said in the guide book.

Details of the Third Plenum discussions, released by Xinhua, showed that the country is keen to implement radical reforms to transform the domestic economy, making growth more consumption-driven rather than export-driven.

China has promised to allow more privatization in state-owned enterprises, speed up the opening of its capital account, liberalize interest rates and introduce further financial sector reforms.

The Third Plenum has promised more role for markets in the world's second largest economy, while agreeing to deepen the country's economic reforms. The ongoing restructuring of the economy has been weighing on growth for sometime now. However, the latest set of economic data suggested that the recovery has gathered pace.

Growth has begun picking up in China, the Organization for Economic Co-operation and Development, or OECD, said in its latest global outlook report published Tuesday.

The OECD expects the economy to expand 7.7 percent this year and 8.2 percent in 2014. However, the growth is forecast to moderate to 7.5 percent in 2015.

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