China ‘closer to flexible exchange rate’

The move will improve the capitalisation of Bank of China and China Construction Bank prior to the opening up of the Chinese banking market to foreign competitors at the start of 2006. China is committed to this as part of World Trade Organisation commitments.

"The strengthening of the banking system is a key requirement for the freeing up of the capital account," said David Mann, economist at Standard Chartered in London. "This is another small step on the way to opening up the exchange rate