The opening of capital accounts should strictly follow orderly principles, said Chinese Vice Premier Wen Jiabao in Beijing on Friday at the ASEAN+3 High Level Seminar on the Management of Short-Term Capital Flow and Capital Account Liberalization.
In his speech to the seminar's opening ceremony, Wen stressed that progress in opening capital accounts must suit the country's economic development and be conducive to its financial stability. The prerequisites for the prudent opening of capital accounts should include a good climate for economic development, correct macro-economic policies, sufficient economic power, a sound financial system and effective financial supervision.
He said that orderly international capital flow was an objective requirement of modern economic development, which could help improve the effective distribution of resources and promote global economic growth. However, international capital flow could also produce certain negative effects. Short-term speculative capital flow in particular had a negative impact on financial markets and economic performance, and could even lead to political and social unrest.
As a result, he said, it was important all relevant parties accepted the need for the orderly opening of capital accounts and effectively prevented attacks by international capital on local financial markets.
He described China's efforts in steadily promoting the opening of capital accounts, as well as its interest rate and exchange rate policies. The evidence proved that China's practices on opening capital accounts had enabled it to successfully ward off the impact of the Asian financial crisis, promote the country's economic development and contribute greatly to Asian financial stability, he pointed out.
To encourage the gradual opening of capital accounts, regional financial cooperation must be reinforced, he said. Southeast Asia, with the fastest economic growth in the world and more than one trillion US dollars in foreign exchange reserves, had great potential for financial cooperation.
International financial institutions should also play their part in promoting the opening of capital accounts and encouraging international financial cooperation. The international monetary system should be improved, and developed countries should further open their markets to developing countries and provide sustained and adequate capital and technological support for them, he said.
He stressed that drawing up scientific and sound international standards was essential. When designing these standards, the interests of developing countries should be considered.
( October 12, 2002)
