In 2015,heavy capital outflows damaged the Chinese economy and threatened financial stability. In 2016,the outlook for cross-border capital outflows remains unclear as downward pressures on capital inflows continue. China's central bank has a number of tools to support the currency,which remains under selling pressure on global markets. Policy makers should make greater use of these tools and guide expectations of the renminbi's exchange rate while they strengthen regulations on abnormal capital movements and enhance the role of exchange rate policy in financial regulations.

At the same time,we need to reassure the markets by implementing promised reforms. Specifically,we should strengthen the foundation for sustainable,long-term growth through structural supply-side reforms. This is the key to stimulating efficient cross-border capital flows.

Continued Pressure from Capital Outflows in 2016

Since the second half of 2015,expectations of increases in interest rates by the Federal Reserve have been building. At the end of last year,the U.S. central bank did what the markets had been anticipating and made its first rate hike. That had a significant impact on the global economy and the world's financial system. Emerging markets have been buffeted by currency depreciation and market turmoil while outflows of capital have increased. That has led to further slowdowns in emerging market economies. Meanwhile,China's economy has endured increasing downward pressure and its capital markets have also been subjected to great volatility. After the reform of the currency on August 11,2015 -- a move that was in effect a devaluation -- speculation of another devaluation of the renminbi against the dollar took hold.  Against this backdrop,capital outflows from China have been increasing.