(Yicai Global) Dec 23 -- China's Central Bank, The People's Bank of China (PBOC), will seek to create favorable conditions for major international bond index issuing bodies to include Chinese yuan-denominated bonds in their indexes, said Ma Jun, Chief Economist at the PBOC Research Bureau, in an interview with Financial News, a newspaper run by PBOC.
The Central Bank will work with relevant departments to improve standards for regulations and services, which will involve allowing foreign institutional investors to enter the Chinese foreign exchange derivative market for risk hedging and to trade in interest rate derivatives in Chinese interbank market, Ma emphasized.
Rules related to outbound payments of investment principals and profits will be clarified, as well as tax policies concerning investment and interest income. Infrastructure will be improved to offer greater facilitation in related transactions.
As for recent significant fluctuations in the yuan's exchange rates, Ma says that they are mainly caused by the strong rally of the US dollar. Similarly, the depreciation of the yuan exchange rate against the dollar is primarily attributable to a shift in market expectations rather than changes in the economic fundamentals.
We are confident of keeping the yuan at a reasonable and balanced level while enhancing the flexibility of exchange rates by further improving macroeconomic regulation and reform measures, said Ma.
In the future, fluctuations in the value of the dollar will not go in one direction only. Once investors realize that they have been overoptimistic about the dollar, the USD index will be adjusted, and other currencies will go up, Ma suggested.