China intends to liberalize the CNY and transform it into an international free trade currency through a series of initiatives linked to the FTZ (Free Trade Zone) process launched in September 2013. Through the Shanghai-based FTZ, the People’s Bank of China aims at initiating CNY-based cross-border clearing services, currently limited to five companies.
Moreover, Beijing pays attention to establishing a convertible capital account and CNY cross-border transactions, thus claiming access to interest rate liberalization and reorganizing the management of the nations foreign exchange holdings.
The Free trade accounts initiative, an indicator of progress for the Chinese authorities’ reforms in the internationalization of the CNY, was made known during the central banks 30-point guideline 2013 for financial reforms in the Shanghai FTZ, published on 2 December 2013.
China will face difficulties in implementing the FTZ-based measures if the free trade accounts initiative is not materialized.
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