Certainly, in terms of some of the bolder promised measures, like full currency convertibility and interest rate liberalisation, China's policy makers do appear to be moving cautiously.
Macey, Jonathan R. and Colombatto, Enrico (1995) "Public Choice Theory and the Transition Market Economy in Eastern Europe: Currency Convertibility and Exchange Rates," Cornell International Law Journal: Vol. 28 : No. 2, Article 3.
But he thinks even bigger opportunities will come when yuan convertibility and interest-rate liberalisation the two biggest reforms promised come in.Simon Pearson, a China-based business analyst, believes another opportunity lies in simplifying and speeding up imports.
By taking this absurd action the government razed the exchange-rate convertibility system what remained of it as well as the banking system, which, by virtue of its being backed substantially by foreign capital, had until then been strong.
Currency convertibility at a stable rate in turn requires restrictive monetary and fiscal policies.
In April 1991, the country adopted a currency board with a fixed exchange rate regime, the Convertibility plan, which managed to curb inflation successfully: yearly inflation fell from 172% in 1991 to 25% in 1992, and from 1993 until 2001 it remained at single digit levels.
It is expected to allow banks and other businesses within its boundaries to experiment in areas that are tightly controlled in China, including loosening regulation of interest rates and full convertibility of nation's currency, the renminbi.
Analysts say the free trade zone will not just promote interest rate liberalization and currency convertibility but will also allow "financial product innovation" and the raising of money abroad or investment in foreign stocks by corporations.
China's State Council, or cabinet, said it was establishing a pilot zone in Shanghai to test some of the government's financial overhauls, including interest rate liberalization and full convertibility of China's currency, the renminbi, according to reports Thursday in the state-run news media.
The government has promised convertibility of the yuan and interest-rate liberalisation within the area, as it experiments with economic reforms.
