MNI INTERVIEW: Easier Capital Controls May Boost China FDI

--Easing Capital Controls Could Boost FDI, Ex-Mofcom Research Chief Says

--Comments in Second Part of MNI Interview with Huo Jianguo

By Iris Ouyang

     BEIJING (MNI) - China should consider relaxing capital controls among

measures to attract foreign investment as its trade war with the U.S.

intensifies, a former Ministry of Commerce head of research told MNI.

     Loosening regulations and improving the environment for private companies

are key to China's future growth, Huo Jianguo said in an interview, in which he

said the dominance of state-owned enterprises was a stifling influence on the

economy.

     "We are improving, but it is still slow going. China needs to speed up

improving the business environment to allow investors to compete fairly," Huo

said.

     Capital controls, used by the authorities to limit pressure on the yuan,

could be loosened to reassure foreign investors that they can withdraw money

from the country, he said.

     --REDUCE OUTFLOW RESTRICTIONS

     "Protection of assets and restrictions on capital flow sometimes do not

need to be so tight," he said. "Restrictions on foreign exchange outflow should

be reduced when needed, as the majority is still in the hands of the

government," he added.

     "Stopping capital going out would not (help) retain foreign investment. But

it takes time for discussions on these topics to progress from concept into

policy."

     Debate on foreign investment has reignited in recent days, as official data

showed growth in FDI slid to 1.9% in August from 14.9% in July.

     China's strength in global value chains should see it maintain

attractiveness among foreign investors, whose decisions "will be decided by the

business environment," and not by the dispute with the U.S., Huo said.

--MNI London Bureau; +44208-865-3829; email: Jason.Webb@marketnews.com

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