Managing cross-border capital flows key to risk prevention
Economist says it's necessary to constantly improve and stabilize the domestic financial system and enhance its ability to prevent risks
Cross-border capital flows need to be managed in the coming five or ten years, so as to avoid systemic financial risks, said economist Li Daokui, Yicai.com reported.
Li said plenty of financial assets exist as bank deposits and cash, which is highly liquid and can be converted into US$23 trillion.
If the capital account is opened too fast and the public were to change 1/10 of the yuan to other currencies — which would be US$2.3 trillion — it could trigger a financial crisis.
Thus, Li thinks the internationalization and the free flow of the capital account should not be the priority. The primary objective should be stability.
Meanwhile, it is also necessary to constantly improve and stabilize the domestic financial system and enhance its ability to prevent risks, Li added.