SHANGHAI, (Reuters) – China should prevent or defuse external shocks in the coming year. It must also strengthen macro-prudential management to guide market expectations.

These comments are made at a time when the U.S. Federal Reserve is expected to raise interest rates in March. However, its Chinese counterpart, which has increased monetary easing to support a slowing economy to offset the recession, raised concerns about capital outflows as a result of the policy divergence.

China’s currency fell sharply in 2018 during Fed tightening.

China has a better ability to adapt to external change and the Federal Reserve’s tightening of policy may result in less spreadover effects than previous rounds, Wang Chunying of State Administration of Foreign Exchange (SAFE) stated at Friday’s news conference.

The yields on Chinese government bonds dropped across the curve Wednesday after a Chinese official stated that they expect the benchmark lending rate to be cut this week in order to boost the economic recovery.

Wang explained that both capital flows and cross-border loans related to trade finance are stable in the face Fed tightening.

The regulator stated that China should have robust export growth and ample FX liquidity, which will help it better deal with changes in its external environment.

In 2021 the yuan, which appreciated 2.7% against a rising US dollar, was the most performing emerging currency. With a 0.2% year-over-year increase, its gains continued into 2022.

Wang said that China’s surplus current account to GDP ratio in 2021 is tentatively expected to be around 2%.