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Agencies warn of 'abnormal' capital flow risks
By Li Yanping |
January 7, 2009, Wednesday
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Print Edition
Print Edition
CHINA'S central bank and foreign-exchange regulator yesterday warned of rising risks to the nation from ''abnormal'' capital flows caused by the worst financial crisis since the Great Depression.
''Due to the world economic recession and financial turbulence, the abnormal movement of cross-border capital will bring potential risks,'' the State Administration of Foreign Exchange said in a statement on its Website. ''The direction that the flows will take is largely uncertain.''
Falling interest rates and a halt in gains by the yuan against the United States dollar have brought the risk of an exodus of cash from China as investors seek better returns elsewhere, Bloomberg News said. The nation's foreign-exchange reserves, the world's largest, fell for the first time in five years because of the crisis, a government official, Cai Qiusheng, said last month.
''Their reserves are so large that they could offset any outflows fairly easily,'' said Mark Williams, an economist at Capital Economics Ltd. in London.
China's currency reserves stood at US$1.9 trillion at the end of September. The role of that stockpile as ''the last protection'' against economic risks must be preserved, the currency regulator said.
China will set up an early-alert system for monitoring capital flows and ''further improve the emergency protection system'' for the international balance of payments, the regulator said.
''Due to the world economic recession and financial turbulence, the abnormal movement of cross-border capital will bring potential risks,'' the State Administration of Foreign Exchange said in a statement on its Website. ''The direction that the flows will take is largely uncertain.''
Falling interest rates and a halt in gains by the yuan against the United States dollar have brought the risk of an exodus of cash from China as investors seek better returns elsewhere, Bloomberg News said. The nation's foreign-exchange reserves, the world's largest, fell for the first time in five years because of the crisis, a government official, Cai Qiusheng, said last month.
''Their reserves are so large that they could offset any outflows fairly easily,'' said Mark Williams, an economist at Capital Economics Ltd. in London.
China's currency reserves stood at US$1.9 trillion at the end of September. The role of that stockpile as ''the last protection'' against economic risks must be preserved, the currency regulator said.
China will set up an early-alert system for monitoring capital flows and ''further improve the emergency protection system'' for the international balance of payments, the regulator said.
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