China will open up its capital account step by step after its admission to the World Trade Organisation (WTO), according to a senior official at the State Administration of Foreign Exchange (SAFE). 'There is no need for China to fully open its capital account in accordance with WTO requirements, but Beijing has set it as a long-term target,' said Hu Xiaolin, SAFE deputy director-general. Speaking at the Asian Securities Analysts' Federation 2001 Conference, Ms Hu also unveiled the principles behind the opening up of the country's capital account. Controls on short-term investments in securities and financial sectors are more stringent, while capital account transactions on long-term investments in industrial and commercial sectors will see fewer controls, she said. Analysts said it was the first time a senior Chinese official had detailed the government's principles regarding its capital account since China obtained approval to join the WTO, ending a 15-year quest. China is expected to formally join the WTO next week. Analysts said the remarks mean China would initially open up capital transactions on long-term fixed investments such as industrial and property sectors, followed by securities and financial-related transactions. Guo Shuqing, director of Safe, was quoted by the Financial Times as saying the government had relaxed its grip on some capital account transactions in recent years, such as foreign direct investment and the purchase of foreign bonds by domestic financial institutions. Ms Hu yesterday gave no timetable for when Beijing would open up the capital account and when China would allow a full convertibility of the yuan. China's yuan is convertible only on the current account, not the capital account. Officials at the People's Bank of China have vowed to keep the yuan stable, but they have also said a more flexible exchange rate would be needed to help cope with the external shocks after China becomes a WTO member. Since April last year, the central bank has allowed the yuan to close frequently, although marginally, outside the firm end of the 8.277 to 8.28 per US dollar range. Ms Hu said the opening up of the capital account would boost the economy by increasing foreign direct investments. However, there is no proof the move would guarantee economic growth. A sudden inflow of capital could pressure interest rates and exchange rates, she said.