China should loosen rein on capital outflow:expert

China should loosen its rein on capital outflow when enterprises go overseas, to promote the opening-up of capital accounts, said a senior official of the People's Bank of China.

"For a long time China has been favoring capital inflow but checking outflow. There is almost no limit for foreign direct investment, but small and medium-sized enterprises and individuals still have few channels to conduct outbound investment," Sheng Songcheng, head of the central bank's statistics department, was quoted as saying by 21st Business Herald on Saturday.

There is no fixed sequence for reform on interest rates, currency, and capital accounts, he said. "We should only open up one item at a time when conditions for that item mature."

In the future, China will face more capital inflow pressure than outflow, as high saving rates continue to generate trade surplus, and therefore encouraging enterprises to move capital offshore and invest overseas would be helpful, he said.

Opening up capital accounts does not mean there is no regulation on cross-border capital flow and financial transactions, but the Chinese financial market is huge enough to solve risks related to such reform, Sheng said.