Author: Fan Gang, President of CDI

Editor’s Note: A gradual devaluation of the yuan should be allowed as the U.S. dollar is set to strengthen, and moves to loosen the nation’s capital borders should continue despite outflows.

In a Bloomberg Television interview on the decrease of China’s foreign-exchange reserves and the yuan devaluation, Prof. Fan Gang said a gradual devaluation of the yuan should be allowed as the U.S. dollar is set to strengthen, and moves to loosen the nation’s capital borders should continue despite outflows.

Although China’s economy has bottomed out with housing and manufacturing improving, it is “natural for investors to look outside for opportunities” as China is still struggling to remove excess capacity. Additionally, Brexit added downward pressure on the yuan. China should encourage private sector capital flows, allowing qualified domestic individuals to invest overseas, and moderately widen the FX-conversion quota for the public, he said.