Bert Hofman of World Bank sees that the outflow of capital from China, i.e. the internationalizat...

BERT HOFMAN OF WORLD BANK SEES THAT THE OUTFLOW OF CAPITAL FROM CHINA, I.E. THE INTERNATIONALIZATION OF RMB AS IMPORTANT, AND IS SET TO HAPPEN IN THE NEXT 5 TO 10 YEARS. SHOWS: HONG KONG, CHINA (DECEMBER 21, 2012) (REUTERS - ACCESS ALL) BERT HOFMAN, DIRECTOR & CHIEF ECONOMIST, EAST ASIA AND PACIFIC REGION, WORLD BANK 1. REPORTER OFF CAMERA SAYING: "Do you expect Asian policymakers to ease further in 2013?" 2. BERT HOFMAN SAYING: "Right now, most of the economies are more or less at full capacity. So if nothing bad happens, there is no reason to loosen further because they are very much on track. Of course if there were to be a shock to the world economy and we discussed it in the report if we discussed a number of sources of possible shocks, policymakers should react. We actually believe that on the fiscal side, there is more potential for boosting growth than on the monetary side. So if there were to be a shock, the reaction from the fiscal authorities could probably boost growth more than the monetary side." 3. REPORTER OFF CAMERA SAYING: "China's economy seems to be turning a corner over the last few months and your latest report puts growth at 8.4% in 2013. Are you convinced that China can maintain its economic stability in prosperity at these rates?" 4. BERT HOFMAN SAYING: "Well China did slow down this year quite a bit, especially the first few quarters. Overall this year, they come out at 7.9%, the lowest growth rate since 1999. But at largely in the second half. They had seen a recovery in the 3rd quarter, there was a 9.1% on an annual basis growth. And we see that continuing into the 4th quarter. That lifts up growth and next year as well. Because the base was a bit lower than before. So you see a bit of a base-effect. We expect China to be growing in the order of 8.4% next year. And then gradually going into its longer-term potential growth rate, which we see declined over the next decade, if you want something like 8% in 2014, all the way down to 5% by the end of the next decade." 5. REPORTER OFF CAMERA SAYING: "And China has moved to relax capital controls in further the country's long-term goals toward liberalizing its currency. How will this impact its investment flows here in Asia?" 6. BERT HOFMAN SAYING: "That's really interesting. And it's one of the big developments that will play out over the next 10 years. I don't think there will be a rapid full liberalization of the capital account and its Central Bank Governor has set as much very very recently. But it's opening up its capital account, that's very interesting. Right now, China still focuses more on the inflows rather than the outflows of capital control. But at the same time, China has a saving surplus. So in a way, right now, they have exporters' saving surplus through building international reserves. Now liberalizing on the inflow, which means that they'll probably build up a bit more international reserves, but people do want to invest in China. But the outflow of capital from China is going to be important going forward in our view. And then if you want, that's the internationalization of the RMB. So that much more credit from China can be expected. That's good actually. It finances lots of needs in the region, especially in infrastructure, but also in manufacturing. So that's what I think it's going to happen over the next 5 to 10 years."