China says capital outflows 'normal', no capital flight

Updated: 2015-04-24 09:54

(Agencies)

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China's capital outflows are "normal" and should not be regarded as capital flight, a senior official at the currency regulator said on Thursday after data showed money had left the country at its fastest pace in two years in March.

Guan Tao, the head of the department of international payments at the State Administration of Foreign Exchange (SAFE), said China was closely watching its cross-border capital flows, but has no plans to stop cash from leaving the country.

"Capital outflows are expected adjustments, which cannot be equated to illegal activities or secret capital flight," Guan told a news briefing.

"Currently, the domestic economy faces relatively big downward pressure, and the world economy is in the middle of deep adjustments. The US dollar continues to strengthen," he said.

Data earlier this week showed the central bank and commercial banks had sold a net 156.5 billion yuan ($25.3 billion) worth of foreign exchange in March, a high last seen in March 2013.

Analysts say foreign exchange sales point to capital leaving China, which can be problematic as it shrinks the country's money supply at a time when its economy is grinding towards a 25-year low in growth.

Separate data released by SAFE on Thursday also suggested that funds were exiting China, as figures showed commercial banks and the central bank logging a $91.4 billion deficit in foreign exchange settlement in the first quarter.

Guan said authorities can offset the impact of capital flows by adjusting interest rates or banks' reserve requirements to ensure the economy has an ample supply of yuan.

He added that China's government does not wish to see any further depreciation in the yuan, in a reiteration of Premier Li Keqiang's comments earlier this month.

Pegged to a rising dollar, China's yuan has surged this year against a host of other currencies such as the euro, increasing the pressure on exporters which already face lukewarm foreign demand.