The Bank of Canada said on Tuesday that China's move to loosen its foreign exchange controls was an important step forward.

Bank of Canada Deputy Governor Timothy Lane said in a speech that to rebalance global growth, countries that are running current account surpluses need to increase domestic spending, while deficit countries need to decrease theirs.

In this regard, China's recent decision to enhance the flexibility of its exchange rate is an important step forward; its full implementation will contribute to strong, sustainable, and balanced global economic growth, he said in the prepared text of a speech he was giving in Winnipeg.

Lane repeated the central bank's outlook on the Canadian economy, emphasizing that the extent and timing of any further withdrawal of monetary stimulus would depend on how the outlook for economic activity and inflation evolves. (Reporting by Louise Egan; editing by Peter Galloway)