Dollar rate rise not a huge threat to China: central bank

Zhou Xiaochuan, the governor of the People's Bank of China Photo: Xinhua

The increase in the interest rate of US dollar will not become a huge threat to China’s economy, according to Zhou Xiaochuan, the governor of the People's Bank of China.

He made the remarks at a press conference during the Two Sessions on Thursday.

“If the Federal Reserve is going to raise the interest rate of US dollar, people may consider to buy more US dollars, or deposit some US dollars abroad, which is a reasonable move” Zhou said, “But the Federal Reserve will do it in a cautious and moderate way, so there will be no large room for ‘hot money’ or speculation.”

On the other hand, according to Zhou, the interest rate increase in the US dollars also has good effects, as it shows a substantial recovery of US economy after the latest economic crisis. “This is also an optimistic signal for the global economy,” Zhou said.

As the capital flight in some countries is severe due to the lack of confidence in the economy, Zhou conceded that it also exists in China, but at a small scale, most of which is associated with normal trade and investment activities.

According to Zhou, the definitions of capital flow and capital flight are different, and the capital flow remains normal as “we have to pay money when we buy things and services.”

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