BEIJING (MNI) - The Chinese government should consider tightening capital controls to carve out monetary policy independence in a world of near-zero U.S. interest rates, a government economist proposed Tuesday.

Zhang Ming, an economist with the Chinese Academy of Social Sciences, said in an opinion piece in the Financial News, that hints from the Federal Reserve that a near-zero interest rate policy will be in place for a while constrains the independence of other countries in monetary policy-management.

"We have two ways to respond: one is reinforce capital controls to strengthen the independence of monetary policy in protecting against risk. Secondly, to balance the supply and demand of domestic asset prices to make prices more reasonable," he said, without providing further details.

Zhang said that near-zero U.S. rates mean that countries cannot appreciate their currencies without triggering an inrush of speculative "hot money," thereby inflating domestic asset bubbles.

He also said that dollar weakness only fuels arbitrage trading and forces commodity prices higher.

The Financial News is backed by the People's Bank of China, although there is no suggestion that Zhang is voicing official opinion.

China has joined a global chorus in criticizing Fed policy, accusing Washington of fueling a U.S. dollar carry trade which risks derailing the global economic recovery.

China has so far made no official indication that it plans to strengthen the controls on its capital account, despite data showing a significant increase in the volume of capital -- both identifiable and otherwise -- that is flowing onshore.

The surge in capital inflows since the middle of the current decade has forced Beijing to take unprecedented measures to liberalize its capital account in order to provide a pressure valve for the hundreds of billions of dollars that has flowed into the country.

Beijing made the yuan fully convertible on the current account in 1996. Similar plans to allow for convertibility on the capital account were shelved following the outbreak of the Asian Financial Crisis in the late 1990s.

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