vertibility. Speculation tal in March 2013 after the new government suggested that it would unveil, by the end of 2013, a concrete plan for achieving full convertibility It is possible that the grand(but unpublicized) vision of Chinese financial reformers is to deregulate domestic financial markets and make the rmb a fully convertible international currency, with domestic bond markets liquid and reliable enough to enable it to become a major reserve currency. But even if so, it is scarcely plausible that this vision could be realized on a time scale of less than one or two decades. More convincing is the explanation I have suggested here, namely that the rmb internationalization program, which seemed to be a thrust toward capital-account opening, was in fact more a tactic in an opportunistic campaign to liberalize domestic financial markets in the face of opposition or suspicion by the nation's political leadership. On the whole, the coming years are likely to see further spasmodic liberalization of Chinas domestic financial system-more through the growth of the lightly-regulated"shadow sector and gradual incorporation of some of its innovations in the formal banking sector, than through a clear-cut program of deregulating banking activities directly. Progress on opening up the capital account, recent appearances notwithstanding, is likely to be far more modestconvertibility. Speculation over the possibility of swift capital-account liberalization intensified in March 2013 after the new government suggested that it would unveil, by the end of 2013, a concrete plan for achieving full convertibility. It is possible that the grand (but unpublicized) vision of Chinese financial reformers is to deregulate domestic financial markets and make the RMB a fully convertible international currency, with domestic bond markets liquid and reliable enough to enable it to become a major reserve currency. But even if so, it is scarcely plausible that this vision could be realized on a time scale of less than one or two decades. More convincing is the explanation I have suggested here, namely that the RMB internationalization program, which seemed to be a thrust toward capital-account opening, was in fact more a tactic in an opportunistic campaign to liberalize domestic financial markets in the face of opposition or suspicion by the nation’s political leadership. On the whole, the coming years are likely to see further spasmodic liberalization of China’s domestic financial system – more through the growth of the lightly-regulated “shadow” sector and gradual incorporation of some of its innovations in the formal banking sector, than through a clear-cut program of deregulating banking activities directly. Progress on opening up the capital account, recent appearances notwithstanding, is likely to be far more modest