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-- Wu Xiaoling, a deputy governor of the People's Bank of China, said she was in the dark about a report that the government is about to ease controls on capital outflows by giving the go-ahead to the first mainland fund to invest abroad.

The China Securities Journal reported Friday that a Shanghai-based local fund management company is likely to be selected to raise a fund of around US$3 billion to invest in fixed-income assets in global markets.

But Wu told reporters at a financial forum in Beijing on Saturday: "I haven't heard anything about this."

China has long been studying the Qualified Domestic Institutional Investor (QDII) program as a way for fund managers, insurers and pension companies to spread their risk and increase the returns on their assets.

As well as allowing domestic funds to diversify their investments, QDII outflows would relieve some of the pressure pushing up the yuan generated by the country's trade surplus, inflows of foreign direct investment, and influx of speculative hot money.

Senior officials recently said the government would soon give banks and corporations more leeway to invest in overseas assets, Qu Hongbin, an economist with HSBC, noted in a report.

He said it was becoming pressing for China to decentralize its channels of exporting capital away from the central bank's reserve purchases, which have built up a US$819 billion stockpile of assets.

"The launch of the first QDII fund is expected to kick-start this process," Qu said.