Central bank warns of capital flows (2)

Pan said international supervision over developed countries' policies should be further strengthened.

"Against such a backdrop, it's very important for emerging markets to complete a cooperative framework to better monitor cross-border capital flows and reduce risks of currency exchange rate fluctuation," he said.

In recent years, China has been promoting global use of its currency, the yuan, and the need to make it an international currency, but analysts and international organizations such as the International Monetary Fund have said that a premise for that goal is to open the capital account and make the yuan fully convertible.

Robert Mundell, professor of economics at Columbia University, who is also a Nobel laureate, said some major economies' easing policies, such as the US' third round of quantitative easing, did not affect China much because China's capital flows are controlled.

"If they want to open up the capital account, they could have done it 10 years ago. It's not an issue of QE2 or QE3. But QE3 does have an effect that China would probably move in a direction of letting the yuan appreciate more rapidly."

Jim O'Neill, chairman of Goldman Sachs Asset Management in London, said: "Many investors around the world are watching the PBOC's policy on the exchange rate very closely. Because of the monetary-easing policies in the United States, Japan and Europe, many people think that it would be easy for the yuan to rise significantly if the PBOC allows it.

"I expect the yuan will become more volatile ... in line with China becoming a more developed economy. The yuan exchange rate against the dollar won't be one-way anymore, and it will become a more 'normal' currency."

Danny Quah, professor at the London School of Economics and a former member of Malaysia's National Economic Advisory Council, said it is not a good time for China to accelerate opening up the capital account and making the yuan more convertible, given the large scale of capital inflows into emerging markets after the US announced QE3 in September.

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