The head of Australia’s central bank has called upon the Chinese government to moderate its capital control regime.
Speaking on the topic of RMB internationalisation in Sydney last Thursday, Reserve Bank of Australia Governor Philip Lowe said that excessive restrictions on capital outflows would impede China’s ongoing financial liberalisation efforts.
Towards the end of last year the Chinese government tightened capital controls as investors began to shift funds abroad, due to concerns over easing economic growth and a faltering exchange rate.
The People’s Bank of China offloaded billions of US dollars in 2016, as part of efforts to bolster the slumping Renminbi which is currently under what a managed floating exchange rate.
Lowe said that while these measures might have a salutary impact in the short-term, they ran contrary to China’s financial liberalisation goals, and could have an adverse effect on overseas perceptions.
“Short-term controls arguably can have a positive effect on financial stability in China..but there is a balance to be struck here,” said Lowe.
“One consideration is the signal that a tightening of controls, after several years of liberalisation, could send to investors about how the government perceives the balance of risks facing the economy.
“The rest of the world is watching and it has a strong interest in the outcome.”