China says can control Sino-U.S. trade-row impact on capital flows

BEIJING (Reuters) - China’s foreign exchange regulator said that any potential impact on the nation’s cross border capital flows stemming from Sino-U.S. trade frictions can be controlled, and vowed to continue with plans to further open up capital markets in the world’s second-biggest economy.

FILE PHOTO: U.S. Dollar and China Yuan notes are seen in this picture illustration June 2, 2017. REUTERS/Thomas White/Illustration/File Photo

Wang Chunying, spokeswoman at the State Administration of Foreign Exchange (SAFE), said China isn’t expecting any major shifts in capital flows and is able to manage a normalization of monetary policies across the world.

“If global economic recovery continues, it’s an inevitable choice that monetary policies of major economies will start to normalize,” Wang told reporters in a regular briefing on Thursday.

“However, its impact on China still can be controlled.”

Wang said the capital-flow impact arising from the trade standoff with the United States isn’t likely to be disruptive.

“We have conducted an in-depth analysis on the impact on China’s cross-border capital flows, and it shows that currently, the Sino-U.S. trade frictions on China can be controlled.”

Wang said the regulator is planning to increase the quotas for two outbound investment schemes - Qualified Domestic Limited Partnership (QDLP) and Qualified Domestic Investment Enterprise (QDIE).

She expected the dollar to face some downside pressure.

“The pace of normalization of monetary polices of major economies will be different and will continue to exert downward pressure on the U.S. dollar.” .

The regulator will continue to steadily push through two-way opening of the capital account and foreign exchange, Wang said, adding that SAFE will also focus on fending off risks in cross-border capital flows and will maintain and increase the value of foreign exchange reserves.

Wang’s comment reinforces a pledge made by Chinese President Xi Jinping earlier this month to further open up the economy to foreign investors and competition.

China’s forex supply and demand were basically stable in the first quarter, she said.

China’s commercial banks sold a net $9.2 billion of foreign exchange in March, compared with a net sale of $8.2 billion in February, the State Administration of Foreign Exchange said on Thursday.

Reporting by Elias Glenn and Stella Qiu; Editing by Shri Navaratnam