China needs to make the yuan more flexible to cope with rising capital flows, Reuters reported, citing Ma Jun, the chief economist at the central bank’s research bureau. Ma said that capital inflows into China’s bond market could increase as domestic bond yields are higher relative to overseas markets and that as China’s capital account is already partially open, there could be “a substantial increase” in outbound foreign direct investment if China further loosens its grip on capital flows. As part of its ambitions to turn the yuan into a global currency, China plans to free up its capital account though authorities have said some restrictions will be kept in place.
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