China’s central bank chief makes reform appeal: please free up the yuan

China must press on with a “trinity” of reforms to fully realise an open economy, Zhou Xiaochuan, the country’s central bank chief for the last decade-and-a-half, told influential financial magazine Caijing in what could be one of his last major interviews in the top job. Zhou, governor of the People’s Bank of China, said China must embrace free trade and investment, let the market decide the yuan’s value, and scrap capital account controls. Zhou said China’s position in the global economy was the result of a combination of the three liberalisations. At 69, Zhou has designed and promoted a series of economic liberalisations over the last 15 years, including freeing up interest rates at home and earning the yuan a nominal international reserve currency status abroad. Zhou also said China has been trying to find a new way to balance its trilemma, that it can only choose two of the three goals of free capital outflow, an independent monetary policy and a stable exchange rate. Zhou said: “In my understanding, central bank independence doesn’t mean independence from the government. In fact, it means an independent and effective monetary policy”. Zhou said China’s opening could only move forward through the “ratcheting effect”, a reference to the difficulty of reversal once certain events have happened.