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China should also let the exchange rate play a more fundamental
role in foreign exchange resource allocation, regulating
cross-border flows, and balancing international payments, Fang
Shangpu said in an article on Thursday in a publication owned by
the foreign exchange regulator.
China has made moves to open its domestic foreign exchange
markets to foreign investors while at the same time stepping up
controls on money leaving the country as it looks to support the
yuan.
The State Administration of Foreign Exchange (SAFE) this week
said it would let foreign investors trade forex derivatives in
its interbank bond market for the first time.
"(China should) increase the depth of the foreign exchange
market, increase the number of trading tools and market
participants, and establish a multi-tiered and inclusive trading
platform," Fang wrote.
But Fang said China should "strengthen checks of banks' foreign
exchange business to ensure authenticity and compliance",
reiterating SAFE's call for tighter controls of capital
outflows, which have contributed to a weakening yuan and the
drawdown of forex reserves.
Fang also said China would work on including cross-border
capital flow management into its macro prudential risk
assessment framework for banks and would improve policy tools
for counter-cyclical management of cross-border flows.
(Reporting by Elias Glenn; Editing by Robert Birsel)
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