China’s Mr Renminbi says Beijing must dismantle capital controls to create a more globally accessible yuan
- Strict foreign exchange controls not conducive to internationalising the yuan, according to former central bank governor Zhou Xiaochuan
- However, Zhou’s ‘reformist’ take on the yuan runs contrary to some influential voices within China saying Beijing should not rush to open up capital account
China’s former central bank governor says it is time for Beijing to relax capital account controls to facilitate international use of yuan – a suggestion that comes as Chinese officials have been more vocal in criticising the global dominance of the US dollar.
Zhou Xiaochuan, who served as governor of the People’s Bank of China from 2002-2018, said at a financial forum in Beijing on Wednesday that China cannot have it both ways by maintaining rigid capital account controls while promoting use of the yuan abroad, according to Chinese magazine Caixin.
“Many of us were educated with command-economy textbooks … and we tend to prefer [tighter] controls, with a constant fear of things getting out of control,” Zhou was quoted as saying. “It seems we have a kind of mistrust or even a fear of the market and prices, including the exchange rate.”
Zhou, who is known as Mr Renminbi for his promotion of the Chinese currency, was quoted as saying that China’s obsession with stability is at the heart of its capital account controls, and that Beijing needs to abandon that mindset in promoting “free use of the yuan”.
The good guy will follow the rules, but the bad guy will find a way to get money out
Zhou also said that capital account controls are often ineffective.