Yuan needs to be reformed early: ADB

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Tokyo, June 14: The head of the Asian Development Bank said on Tuesday that China should maintain some controls on cross-border capital flows even after it loosens its yuan currency, a move that could lessen any market disruption.

Reiterating a call for an early reform of the yuan, ADB President Haruhiko Kuroda said the pace of any reform should be gradual.

China is under intense pressure from its trading partners to adopt a more flexible exchange policy for the yuan, which Beijing maintains in a narrow band near 8.28 to the US dollar.

"First, the exchange rate adjustment should be made sooner rather than later. Second, the pace of the adjustment should be gradual, not abrupt and big," Mr Kuroda said during questions after a speech at the Foreign Correspondents' Club of Japan.

He added that a gradual pace of reform would be better to avoid a large impact on Asian economies, but stressed that when and how to reform the yuan should be up to Beijing.

Mr Kuroda said some controls should be maintained for the yuan's convertibility even after China makes the currency more flexible, especially if Beijing does decide to make the regime adjustment gradual.

"I myself have argued that capital controls should be retained for the PRC because a gradual adjustment will require some capital controls," Mr Kuroda said.

Some experts have called for China to quickly reduce controls on non-trade-related transactions. But others have argued that keeping some controls on cross-border capital flows even after loosening would be better to avoid unnecessary disruption in the market.