Is China Opening its Capital Accounts?

It seems China is going to take a different tack to avoid inflation:

Dec. 22 (Bloomberg) -- China will support international investment by companies next year as part of its effort to expand channels for such outbound ventures, said Wei Benhua, deputy director of the State Administration of Foreign Exchange.

China will also relax controls on individual overseas investment, Wei said today at a conference in Beijing.

``The move will help solve the problem of China's imbalance of international payments and the increase in currency reserves. It is also good timing for China to open its capital accounts,'' Sun Mingchun, an economist Lehman Brothers Holdings Inc. in Hong Kong, said today in a telephone interview.

A record trade surplus and inflows of speculative capital betting on faster yuan gains have pushed up China's foreign exchange reserves to about $1.4 trillion, fuelled asset bubbles and driven up inflation. China's top currency regulator, Hu Xiaolian, said Dec. 5 that China should expand channels for overseas investment and relax controls on capital outflows.

Relaxing controls on individual investment ``can help China's individual investors diversify risks from the local stock markets,'' Lehman's Sun said.

China Investment Corp., the country's sovereign wealth fund, may invest in China Petroleum & Chemical Corp. to help fund the oil company's investments abroad, China Business News reported yesterday, without saying where it got the information.