Today brings yet more hints from Chinese regulators about the future opening up of the country’s capital account.
Ever since China said in late June that it was abandoning its dollar peg, the Chinese central bank has published a blizzard of public statements explaining its position – five from vice governor Hu Xiaolian and another bunch from Safe, the body that manages China’s foreign exchange reserves and regulates the currency market.

Why all the announcements from the usually media-shy regulators?

The latest statement from Safe today said that it was considering introducing new foreign exchange instruments, as well as containing a pledge to push forward with selective capital account reforms.

There was no information about what these new products might be – market participants say that FX options are likely to be the next new development – but the statement follows an interview given last week by Yi Gang, the head of Safe, when he suggested that China was moving gradually towards a freely-floating currency.

The most common explanation for the sudden flurry of announcements is that the central bank has been battling to win domestic political support for the shift to a more flexible currency, which has been resisted in many quarters.

But the hints about new openings in the foreign exchange market are also partly directed at an overseas audience where there are already grumblings about the slow pace of change in the exchange rate since the initial fanfare.

As Mark Williams at Capital Economics pointed out today in a note entitled ‘Return of the Peg’, the renminbi barely moved at all against the US dollar during July. Indeed, “the renminbi has actually weakened in trade-weighted terms since the reform was announced”. He adds: “The return to, in effect, a dollar peg so soon after the policy reform was restarted is surely not sustainable for long.”