China needs to make its currency, the renminbi, more flexible to cope with possible fluctuation in capital flows, Reuters cited a top economist at the People’s Bank of China (PBoC) as saying.
Ma Jun, the chief economist at the central bank’s research bureau, told a forum Tuesday that China’s net capital flows may not be as big as some expect once the country frees its closed capital account.
However, capital inflows into the nation’s bond market could increase as domestic bond yields are higher relative to overseas markets, he was quoted as saying.
Ma said that as China’s capital account is already partially open, there could be “a substantial increase” in outbound foreign direct investment if the country further loosens its grip on capital flows.
“China needs to further increase the yuan’s flexibility,” said the economist.
As part of its ambitions to turn the yuan into a global currency, China plans to free up its capital account though authorities have said some restrictions will be kept in place.
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