China Says to Tighten Control of Capital Flows

China intends to strengthen its supervision and control of cross-border capital flows in order to protect stability in the financial system, Vice Premier Wang Qishan said on Friday.

"We will continue to strengthen supervision over cross-border capital flows and accelerate the development of the financial security network," he told a financial conference in Lujiazui, the financial district of Shanghai.

CNBC.com

Wang did not elaborate on how China would tighten control of capital flows, but said instability in the financial system was particularly unfavorable for developing countries such as China.

He cited threats to stability including a weak U.S. dollar, a global liquidity squeeze and the rising complexity of capital flows.

"Financial security is related to overall economic and social stability, and also concerns the fundamental interests of the masses," he said.

In the last several weeks, China's central bank has engineered a pause in appreciation of the yuan against the dollar, while Chinese analysts with links to the government have said appreciation may slow as yuan strength hits China's exports.

Foreign exchange traders believe China may be slowing yuan appreciation partly to deter inflows of speculative capital into the country.

However, central bank governor Zhou Xiaochuan, addressing the same conference on Friday, said that while China needed to protect itself from turbulence in the global economy, it understood that it should also consider the interests of the international community.

"On the one hand we have to maintain healthy and rapid economic development at home, while on the other hand we should shoulder our responsibility in maintaining world economic stability," he said without elaborating.

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