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     BEIJING (MNI) - China should ensure consistent policies in promoting the
yuan's  internationalization and avoid letting trade disputes from weakening its
resolve and hurting long-term reform, Zhou Xiaochuan, the former governor of the
People's Bank of China, said at China Finance YiChun Forum on Saturday in the
northern Heilongjiang province held by CF 40, a prominent Chinese think tank.
     Here are the key points made by Zhou:
     - China should maintain policy continuity on yuan internationalization, or
the market may lose confidence, Zhou said. China may have to weigh losses and
gains and be prepared to make compromises. "Since it is hard to reach agreement
on the benefits and return of yuan internationalization, you must make a choice
and accept that you cannot get everything." Zhou cited the Mundellian Trilemma,
a theory stating a country cannot achieve the free flow of capital, a fixed
exchange rate and flexible monetary policy simultaneously. "The yuan
internationalization should proceed in a low profile to avoid unnecessary
guess," Zhou said, stressing it is a market-oriented process.
     - China is not pursuing the completely free use of the yuan, Zhou said. The
free usable yuan largely refers to its use in real economy sector, including
trade and travel, but certain use in financial market shall be done with
caution, Zhou said. "We welcome long and medium-term capital flow, but do not
welcome or will treat differently the short or ultra-short speculative
transactions," particularly for the short-term financial derivative products,
said Zhou.
     - China will continue with the yuan internationalization at a proper and
gradual pace. The yuan internationalization happened earlier than expected as
the global financial crisis shook the dollar's status as an international
reserve currency, Zhou said. The financial sanctions that the Trump
administration has imposed on other countries will influence the status of the
dollar as an international reserve currency and for payment as the relevant
countries would look for replacement. The yuan's internationalization is
promising, even as the process may not be smooth, Zhou concluded.
     - China welcomes other countries to use yuan as forex reserves or
commercial reserves, and the country will facilitate other countries'
investment, for instance, the yuan's use in financing of Belt and Road
Initiative. Meanwhile, China will further open up its financial market to
support the yuan internationalization.
--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com
--MNI Beijing Bureau; +86 (10) 8532 5998; email: marissa.wang@marketnews.com
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