Yuan to become convertible within 5 years: HSBC

V. Phani Kumar: The leadership transition expected this week at China’s Communist Party will set the stage early next year for a new generation of leaders to take the country’s reins for the next five to 10 years.
The Congress comes amid expectations that policy makers may boost fiscal and monetary stimulus in the near term. But economists at HSBC say the new leaders will almost certainly also unveil certain “big bang” directional changes that will “revolutionize” the country’s financial system.
“We think interest rates will be liberalized, the bond market will double in size, and the [yuan] will become convertible within five years,” said HSBC analysts led by China chief economist Hongbin Qu, who expect the changes to make capital allocation more efficient, boosting the private sector and providing the middle class with greater choice on investing their money.
“This should help rebalance growth from investment to consumption and lift the potential growth rate in the coming years,” they said.
“Although certain restrictions on capital inflows will likely remain, full [yuan] convertibility would take China’s financial integration with global markets to a new level and have a profound impact on both China and the world,” HSBC added. Source