Regulator confident in reining money flux

China’s financial regulator said the country will keep crossborder capital fluctuations under control, during the process of opening the financial sector further, to limit risk of exposure to speculative money from outside.

The country is taking measures “to effectively iron out crossborder capital flow fluctuations and reduce their impact on the foreign exchange rate”, said Huo Yingli, director general of the Macro Prudential Administration of the People’s Bank of China, the central bank.

Her remark came after policymakers upgraded the country’s opening-up plan following the G20 Summit in Japan. Chinese leaders have vowed to lift all foreign investment restrictions, aside from a new edition of the negative list, and to focus on greater openness in many key areas, such as the financial sector.

The central bank is strengthening monitoring of cross-border capital flows, to tame unexpected fluctuations that could hurt the stability of the yuan, Huo told a financial forum on July 6.

The regulator is balancing the broader opening with market stabilization and will achieve high-quality opening-up, although difficulties of risk control may be on the rise, she said.

Huo confirmed that constraints on cross-border financial transactions－both inward and outward－will gradually decrease until fully canceled.

In the face of uncertainties from trade tensions, some regions and countries are shifting to prefer using their own currencies in global trade and investment, prompting reforms in the existing US-dollar denominated global monetary system and providing more potential for the yuan’s broader use worldwide, Huo said.

According to economists, if the trade dispute and gloomy economic outlook push the US central bank to further ease monetary policy－a policy rate cut in July that’s highly expected by the global market－capital flows into emerging economies may rise and the speculative fund will boost the prices of investment assets.