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Business / Economy

Governor says capital flow levels normal

By Zhu Zhe and Chen Jia (chinadaily.com.cn) Updated: 2015-03-12 17:17

China is not currently experiencing great capital outflows, and any expected raising in US interests will not alter or threaten the situation, said the country's central bank governor on Thursday.

Zhou Xiaochuan said the current levels of capital inflows and outflows are normal, supported by cross-border trading and investment.

But some of it will inevitably be considered as speculative, said Zhou, adding that it is hard to give an exact amount of hot money — being moved from one country to another to earn short-term profit on anticipated exchange rate shifts?- but he accepted there would be some.

Abnormal outflows of capital usually happen in countries after foreign investors lose confidence in the development environment or start to worry about the security of their investment.

"It happens in China, too, but the amount is limited compared with regular levels of investment, and we have a stable mechanism to deal with abnormal capital flows," he said.

The US Federal Reserve has hinted strongly that interest rates in the US could start to rise in early 2015, which Zhou said indicates the US economy might be seeing a real recovery after the global financial crisis, which is a good news for the world's economy.

The governor told a press conference that Chinese interest rate liberalization is likely to finally be achieved this year, when the time is right.

"It is very possible the floating ceiling for deposit interest rates can be removed this year," he said.

The central bank lifted the ceiling by 10 percent in February along with a cut in benchmark interest rates, after raising the ceiling 20 percent last year.

He also confirmed that the deposit insurance system will take effect in the first half this year.

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