Capital controls could help China c

Capital controls could help China control the massive outflows of hot money from its economy and stabilize its currency, the Japanese central bank governor said on Saturday.



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China suffered almost $700 billion of capital flight in 2015 according to the Institute of International Finance. Companies rushed to repay oversees loans as the yuan depreciated and global markets grew increasingly worried about the country's economic slowdown and Chinese authorities' interventions in the financial markets.


Haruhiko Kuroda, who headed the Asian Development Bank prior to his leadership of the Bank of Japan, said that Chinese authorities were struggling to stabilize the yuan while maintaining an accommodative monetary policy stance.

"In this kind of somewhat contradictory situation, capital controls could be useful to manage the exchange rate, as well as the domestic monetary policy, in a consistent and appropriate way," Kuroda said at a World Economic Forum panel discussion on Saturday in Davos, Switzerland.

Capital controls would be controversial, following the International Monetary Fund (IMF)'s decision to admit the yuan into its reserve currency basket last year. This was on the grounds that it had become a "freely usable" currency — which capital controls could impede