Financial reform will be gradual and wide-ranging

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China will liberalize the financial industry in a gradual and comprehensive manner through opening its capital account, according to policy makers.

The government made a milestone gesture in liberalizing the currency regime by doubling the yuan's daily trading band against the US dollar to 1 percent from 0.5 percent, effective last week, while China's top economic planning body continued to push Shanghai toward its goal of becoming a global financial hub by 2020.

"Shanghai has its own advantages in the existing financial infrastructure," Wu Xiaoling, former deputy governor of the central bank and now deputy head of the Fiscal and Economic Committee of the National People's Congress, said in a meeting on Saturday.

Wu suggested the city's assets and equity exchanges be merged to create a host of integrated services to benefit more enterprises as Shanghai embarks on the path to set up a multi-level capital market. But she pointed out that stricter regulatory supervision is vital in a market maker mechanism that is necessary in a more diversified market.

Wu said that Hong Kong as an offshore market for the yuan is the experimental field for the currency's internationalization.

"And Shanghai, as the onshore center for yuan settlement, will naturally become a global financial center (when the currency goes international). But the city needs to explore and expand the ways of channeling the yuan from the offshore markets back to the country," she pointed out.

Economists and analysts said the internationalization of the yuan and interest rate liberalization will further open China's capital account under the financial reforms. They said easing the effective control on interest rate has become a pressing task to meet market demand.