A $100 banknote is placed next to 100 yuan banknotes. Photo: Reuters
China's promise to keep its currency stable in the global monetary system in 2017 sends a message that Beijing is planning to step up its efforts to promote the yuan's internationalization, according to an analyst.
In the government work report delivered to the opening session of the National People's Congress (NPC), China's top legislature, on Sunday, Chinese Premier Li Keqiang said that Beijing will ensure the yuan's stable status in the global monetary system this year.
It is the first time that Beijing highlighted the yuan's international role in recent government work reports. Usually Beijing would say that it aims to stabilize the yuan's exchange rate at a reasonable and balanced level.
"The emphasis on the yuan's international position (in the government work report) seems that the Chinese government will accelerate its efforts to internationalize the yuan, as the pressure of the currency's depreciation would be largely alleviated this year," Zhang Yu, a Beijing-based analyst at Minsheng Securities, told the Sino-US.com.
The Chinese currency weakened around 6.8 percent against the US dollar in 2016, as the US economic recovery and expectations for more interest rate hikes prodded the US dollar higher. But the yuan remained relatively stable against a basket of other currencies.
The process of the Chinese currency's internationalization was slightly impeded after the Chinese government adopted a relatively flexible exchange rate mechanism in recent two years, and it is high time to restart the internationalization journey after the yuan's hardest times came to an end last year, Zhang said, adding that Beijing will seek wider use of the yuan in the international financial system and the cross-border trade settlements.
She described China's current exchange rate mechanism as "very transparent and flexible", with little government intervention. "To some extent, it is an automatic mechanism."
On Friday, Yi Gang, deputy governor of the People's Bank of China (PBC), the country's central bank, said in an interview that China has not set a specific timetable yet for the yuan's clean floating exchange rate mechanism.
Amid concerns that Yi's statement may affect the yuan's internationalization, Zhang said "it does not go against Beijing's push to make the yuan international, as China is still a developing country that disallows a drop of the central parity rate mechanism and full convertibility of capital accounts. The adoption of a clean floating exchange rate mechanism will depend on the development of the domestic economic transformation and the global financial situation. It cannot be made overnight."