China plays down capital exodus

BEIJING - A senior Chinese foreign exchange official on Thursday played down concerns about an exodus of capital from China, denying that it indicated illegal speculative activity.

Guan Tao, head of the international payments department at the State Administration of Foreign Exchange (SAFE), told reporters that the capital outflows are "normal" and "within expectation".

Guan made the statement after foreign media reports of money being moved out of China as investors face up to poor economic growth prospects and depreciation of the yuan.

Data released by the SAFE at Thursday's press conference showed funds are leaving China as the country's central bank and commercial banks posted a deficit of $91.4 billion in foreign exchange settlement in the first quarter, nearly double the amount in the preceding quarter.

Guan attributed the outflows to increased downward pressure facing the Chinese economy and a stronger US dollar amid speculation that the US Federal Reserve may raise interest rates.

He said China is able to handle the pressure from capital outflows as the central bank can adjust the interest rates, banks' reserve requirement ratio and other policy tools to ensure the economy has ample liquidity of the yuan.

The capital outflows may ease or even reverse to become inflows in the future, according to Guan.