CHINA’S leading free trade zone (FTZ) faces currency risks and the authorities should be cautious in opening up the capital account, the Chinese Academy of Social Sciences (CASS), a top government think tank, said Tuesday.

    “Foreign exchange risk is the biggest risk facing Shanghai’s free trade zone,” the think tank said in its “blue book” on the country’s free trade zones, which was published Tuesday. Financial innovations in the free trade zone should be carried out in an orderly way on condition that risks are under control, the think tank said.

    The government said in December it would allow limited convertibility of the yuan in free trade zones in Guangdong, Fujian and Tianjin. But CASS said China must be cautious in opening up its capital account because “large-scale short-term capital outflows could hit China’s financial system and the real economy.” (SD-Agencies)