China to relax capital controls

China is set to use swelling offshore holdings of its tightly-managed currency worth around ¥ 1 trillion (£70.5bn) to justify a landmark shift in tactics to relax capital controls. The shift means the People’s Bank of China (PBOC) will abandon a time-table approach to liberalising capital controls, favouring instead a series of reforms tied to soaring foreign demand for yuan to give more freedom to invest offshore currency deposits on the mainland. Sources said the bank believes the strategy shift would shield the economy from the risk of a 1997-98 style Asian currency crisis that could be triggered in the wake of liberalisation.