The Chinese currency regulator said Sunday
that it would ease rules for capital to flow out of the country this year while
making it harder for money to enter, a move intended to cap increases in China's
foreign exchange reserve, the world's largest.
Yuan banknotes are counted at a
currency exchange store in Hong Kong January 11, 2007. The Chinese
currency regulator said Sunday that it would ease rules for capital to
flow out of the country this year while making it harder for money to
enter, a move intended to cap increases in China's foreign exchange
reserves, the world's largest. [Reuters]
banks, insurers, companies and individuals will be allowed to convert more yuan
into foreign currencies for buying overseas stocks and debt, while rules are
being tightened to control short-term capital inflows.
The moves are aimed at "actively promoting the basic balance" of the Chinese
balance of payments, said Hu Xiaolian, director of the State Administration of
"A persistent and large surplus in the international balance of payments has
added complications and difficulties to macroeconomic controls and increased the
pressure for the yuan to rise, as well as a rising number of trade conflicts,"
Hu's statement was one of several issued by Chinese financial ministries to
flesh out the results of a strategy-setting meeting of China's top economic
planners that ended Saturday.
Premier Wen Jiabao called Saturday for spending more of
the country's foreign exchange reserves and spreading economic growth to rural
areas, seeking to sustain the growth that has made China one of the world's
The government "must actively explore and broaden the channels and manner of
using foreign exchange reserves," Wen said.
China's foreign exchange reserves total US$1.06 trillion and are growing.
How to spend the money - which is usually invested in US Treasury
securities and other low-risk instruments - has been hotly debated among
The conference, held once every five years, comes as the country is trying to
ease friction at home over a widening gap between rich and poor and to dampen
criticism abroad about its trade surplus.
China's 2006 trade surplus jumped 74 percent to a record US$177.5 billion,
further bolstering foreign exchange reserves. Hu is trying to divert the
currency reserves to private hands from government coffers to help the central
bank slow gains in the yuan's value.
Hu announced January 6 that Chinese individuals would be allowed to own twice as
much foreign currency as previously permitted. The regulator will "strictly
control abnormal fund inflows" this year and tighten surveillance over capital
inflows, she said.