The business magazine Caijing this week published a wide-ranging interview with the outgoing governor of the People's Bank of China, Zhou Xiaochuan. Mr. Zhou made a strong case for China moving forward with reforms in order to open up its economy. Zhou hoped, in particular, for exchange rates set by the market and a reduction in capital account controls. He said that now is the appropriate time to move ahead with reforms as later it will be costlier.
The interview was released just days ahead of the National People's Congress. China's central bank, traditionally been a proponent of economic reforms, nevertheless lacks independence and must cope with the fact that reform policies are largely political matters. Progress in reforms has recently ground to a halt as Chinese officials have taken their pursuance of stability into extremes.
Zhou has been at the helm of the PBoC since December 2002. His 15-year term, exceptionally long for China, has witness the pushing through of major reforms on the monetary policy front. Interest-rate regulation ended, the yuan's peg to the US dollar loosened and capital movements deregulated. Indeed, reform progress was so substantial that the IMF last year decided to include it in its SDR basket. Unlike the experiences of many emerging economies, Chinese inflation has remained stable over the last decade and a half. Zhou is expected to retire in the near future.