China FX agency sees smaller capital inflows ahead

BEIJING Feb 23 (Reuters) - China will see smaller and more volatile capital inflows in coming years courtesy of turbulent global financial markets, China's foreign exchange regulator said in its annual capital flow monitoring report published on Thursday.

The State Administration of Foreign Exchange said in the 49-page report, which is largely a review of what happened in 2011, that falling foreign exchange purchases in China's interbank market does not necessarily mean hot money is leaving China.

Investors have been perplexed by recent swings in China's purchases and sales of foreign exchange, unsure of where the capital is going and what the implications are for monetary policy.

The report was publish on the agency's website(www.safe.gov.cn). (Reporting by Zhou Xin and Nick Edwards; Editing by Jacqueline Wong)