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Bigger Yuan Role Needs More Open Capital Account, Fan Gang Says

June 25, 2011

June 25 (Bloomberg) -- Increasing the internationalization of China’s currency while the nation’s capital account isn’t fully open may result in an increase in foreign-exchange reserves which will add to difficulties in managing inflation, according to Fan Gang, a former academic adviser to the Chinese central bank.

Allowing more yuan to flow out of China may benefit the country on the one hand, while on the other hand it may increase the risk of a sudden large inflow of currency that may cause excessive liquidity in the domestic market to worsen, Fan wrote in an article in Globalization, a publication issued by the China Center for International Economic Exchanges.

The center is headed by former Vice Premier Zeng Peiyan.

To contact the editor responsible for this story: Nerys Avery at

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