the eyes of the world were on the Shanghai composite and on the daily fixing of the Renminbi.

Sometimes that doesn't make for pretty reading, Martin Wolf here tell me his take on it.

One possible solution that got put forward in Devos, Martine, was the tighter capital controls,

this was the idea from bank of Japan governer Haruhiko Kuroda.

Will this work? is it a plan that can or is it desperate measures?

I suspect a bit of both. I mean China still has exchange controls, so it's not a fully liberalized system.

It's moving glacially, I think appropriately to becoming a fully liberalized system.

They could tighten the controls. And at the moment, or at least indeed for now for quite some months,

they'd be losing foreign currency reserves at an enormous rate.

They've lost almost 700 billion dollars in the last year and a half.

And even for China, which has 4 trillion dollars of reserves, or had in the beginning, this is an enormous amount.

So they can't really continue to do so. They're obviously doing it to try and stop the exchange rate from collapsing.

We all want it not to collapse cause it would create a big deflationary shock for the world, we really don't need that right now.

Um...but on the other hand, they don't really want to continue like this. So what are the alternatives?

Well basically, in the short run, the simplest thing is to stop the buying by Chinese people of dollars. And controls would do it.

Obviously, then we'll have to get into the question of why are they buying dollars?

Part of it is strike capital flight, I think. People are frightened about the anti-corruption campaign.

Part of it is a lack of good investment opportunities as the economy slows and they'd be investing far too much.

And part of it is Chinese corporates trying to redeem debt, which they can track it in dollars,

and now they realize the dollar's rising, the Renminbi is falling, it's getting more expensive all the time.

And so this is what's going on and some of that, the People's bank could stop if they really wanted to.

Why is this of concern to the bank of Japan though, is it the exporting deflation angle their real problem,

or do they worry about financial market turmoil in of itsefl?

I think that it's both and I think it's true for everybody.

There is a lot of concern now, pretty obviously in the markets and among policy makers about what's happening in China,

particularly since last summer when we had this sort of first bout of turbulence.

Pretty obvious that China is slowing quite fast that the authorities aren't completely in control of this process,

and among other things that they're not so closely linked, there's quite a bit of market turbulence being generated by China.

Part of that is capital outflow and the effects on the currency, and they're particularly concerned with the latter

cause China is the world's largest striding power, it's the world's largest exporter.

If the currency were to collapse and money were really to flood out,

because people would be desperate to get out as they're losing the value of their currency,

that could generate a lot of turbulence in the world.

Unpredictable, but the world is unbelievably delicate in the moment as we can see.

So that's the last thing anybody wants.

And you think what's the message you think tighter controls would give out?

Is it we've got the situation under control or is it we're running out of ideas?

Both, I think. Everybody understands that's the process of integrating the Chinese economy into the world economy,

particularly on the financial side, is going to be a very complicated process, very difficult with lots of risks associated with it.

And that's partly because China so huge, it's partly because China has been separate from the world economy on the financial side pretty well completely,

and it's partly because China is going through this huge complex transition to a liberalized, a more deregulated economy in theory without this giant investment boom.

And if you add these three things together,

you could easily imagine cause there are so much debt now in China and there are so much uncertainty in China that could be very very destabilizing.

I've got a sort of favorite number, um... they're many other ways of thinking about it.

The annual flow of savings, each year savings in China is about, when translated into dollars is worth nearly 5 trillion dollars.

That's almost doubled US savings.

If that were really allowed out, knows what it would do to the world.

So, yes. It is a bit of panic and it is going to be bumpy, and there are going to be processes of liberalization and then reversals.

I don't expect the full integration of China if it happens.

That happen to occur into way into the 2020s.

We've probably got a decay like this in front of us .

Yeah, and a bit interesting to see if there's a collision of views around this bank of Japan position.

Martin, thank you very much.

It's a pleasure.