China Set to Unify Its Two Forms of Currency : Money: Adoption of a single exchange rate is hailed as inviting investment. Scrip for foreigners is expected to be discontinued.

China on Wednesday said it will unify its cumbersome two-track foreign exchange system as of Saturday, thus edging the country a step closer to a fully convertible currency. It was a New Year’s resolution bound to please foreign investors and tourists, and was widely hailed in the international investment community.

The People’s Bank of China, or central bank, announced the reform three weeks before U.S. Treasury Secretary Lloyd Bentsen is due to arrive here. Bentsen, who will be the most senior U.S. official to visit China since the 1989 Tian An Men Square incident, is expected to take part in discussions of trade issues leading up to the annual debate in the United States over renewal of China’s “most favored nation” trading status.

At the least, the change announced Wednesday means an end to the foreign exchange certificates most foreign businesses and tourists have been required to use--at rates below market value--instead of the renminbi (people’s money) used by Chinese citizens.

If the latest move is followed by a program to allow the renminbi to be converted to hard currency, it could greatly enhance China’s candidacy to rejoin the Global Agreement on Tariffs and Trade group.

But many questions remain. For example, the central bank Wednesday did not say what exchange rate will be used in adopting a single currency, nor did it give any timetable for making the renminbi fully convertible .

Currently, there are three exchange rates in China: a fixed, or official rate; a government-managed “swap market” rate for selected foreign and domestic businesses, and a black market rate.

According to the official New China News Agency, the central bank said that beginning Jan. 1, “all foreign exchange earned by any domestic firms or enterprises and foreign trade companies must be sold to the state-designated banks at the rate published by the People’s State Bank of China every morning. The rate will be set with reference to the trading price of the previous day on the foreign exchange market and will follow up the latest changes of main hard currencies in international financial markets.”

One Western diplomat here described the announcement as representing “an important step in the process of opening up the Chinese economy to the outside world.” He added that, along with recently announced tax law revisions, it “shows that China is beginning the year with economic reform in a major way.”

China’s top lawmaker, Qiao Shi, chairman of the National People’s Congress, said in a speech Wednesday that the standing committee of the congress will concentrate next year on economic reform, including new laws for banking, finance and securities.

One Western banker here predicted that the long-awaited move toward a single exchange rate will attract millions of dollars in foreign investment.

Under current rules, foreign investors are required to convert investment funds at the official rate of 5.79 yuan to the U.S. dollar. The market rate, set by the “swap markets” in seven Chinese cities, is about 8.7 yuan to the dollar.

Most companies investing in China have found ways around the artificial exchange rate, however. Officials have estimated that more than 80% of trade already is transacted using the higher swap-market rate.