China should press on with financial reforms - central banker

Any delay in financial reforms will increase costs, said Sheng Songcheng, a senior Chinese central banker, said

China should continue with financial reform now, a senior Chinese central banker said on Friday, warning that costs will increase if reforms are delayed.

Sheng Songcheng, director of the Survey and Statistics Department at the People's Bank of China, said that recent volatility in Chinese stock and currency markets was not due to the opening of China's capital account but that the slow pace of reform was to blame for leaving domestic markets vulnerable to global volatility.

"With financial reform and opening, you can't release the bow then expect the arrow to come back, you can't put off reform opportunity because of market volatility," he told a financial conference in Shanghai.

"China's financial market fluctuations in recent years are the result of inadequate implementation of coordinated reforms."

Sheng added that China was still attractive to long-term foreign capital, and that the government had plenty of leeway to tinker further with economic policy, including further reform to the foreign exchange market given that domestic interest rates are on a downward trend.

China can fully liberalise domestic interest rates as financial institutions have now learned to manage risk, he said.

He said the downward pressure on the yuan was short term in nature and there was no basis for long-term depreciation, repeating what other officials said.

"There could be some excessive depreciation of the exchange rate in the short term, but it will finally strike an equilibrium.

"China has neven allowed the yuan to depreciate at will over the past decade," he added.