Chinese model on financial market will send Russia backward - Nabiullina
MOSCOW. Sept 28 (Interfax) - The Central Bank of Russia (CBR) has cited another argument against segmenting the internal and external forex markets based on the Chinese model in that China has been trying to liberalize control over the movement of capital for years, while Russia has already done so.
"Right now many are looking at China's experience...We're studying the experience of various countries, because not a single experience can be copied. I think everyone knows this quite well, conditions differ everywhere," Central Bank chief Elvira Nabiullina said during a lecture at the economics department of Moscow State University.
China, for example, has a managed exchange rate, multiple interest rates and restrictions on the movement of capital, she said.
"Those who propose that we use this probably forget to look that China has been trying to liberalize the movement of capital, financial markets and so on for several decades already, two decades at least. Why should we move backwards, I don't understand," Nabiullina said.
Nabiullina was referring to recent statements by Economic Development Minister Maxim Reshetnikov, who proposed solving the problem of high ruble volatility and inflation by studying the Chinese model, where the yuan market is divided into internal and external, and to implement a similar approach in Russia.
"We need to probably do something similar to, say, the Chinese model, where there is a kind of membrane between the domestic ruble market and the foreign ruble market," Reshetnikov said in the Federation Council on Monday. He said his ministry is discussing this position with the CBR.
However, he said there was no question that Russia must maintain a single exchange rate for the ruble. "Two rates is an extremely harmful phenomenon. We are opposed to this and here we're of the same position as the Central Bank," Reshetnikov said.
The CBR is skeptical about the idea and believes segmentation of the forex market, including using a so-called "membrane," would lead to multiple exchange rates and negative consequences for the financial market in general.
"Restrictions on the movement of capital are appropriate only as short-term response measures to support the smooth operation of the financial system amid significant risks to financial stability. The Bank of Russia believes that such restrictions cannot be an effective instrument of long-term influence on the market level of the exchange rate," the CBR said later on Monday.