* Looking into application of blockchain, AI in cross-border trade finance
* Will strengthen infrastructure to manage risks as China embraces digital finance
* Too further facilitate cross-border trade and investment (Recasts, adds quotes, details)
SHANGHAI, Oct 27 (Reuters) - China is studying the application of blockchain and artificial intelligence in cross-border financing with a focus on risk management, and will further liberalise its capital markets, a senior foreign exchange regulator said on Sunday.
The comment by Lu Lei, a deputy head of the State Administration of Foreign Exchange (SAFE), comes as Facebook's plan for its Libra digital currency project stirs global interest in the sector.
Lu said that amid heated discussions around Libra globally, SAFE is promoting the application of financial technology and artificial intelligence (AI) in cross-border trade finance, as well as in macro prudential management.
"We need to pay special attention to the rapid development of digital finance and fintech," Lu told a forum in Shanghai. "When we are not entirely certain where a (new) form of business is heading, we must pay attention to risk management."
Facebook's digital currency ambition is causing alarm among central banks around the world, amid concerns over its threat to the global monetary system and implications to data privacy and money laundering activities.
China's parliament on Saturday passed a new law on cryptography, as the country gears up to launch its own digital currency.
Lu said that the basis of risk management is the setting up of an effective financial infrastructure, proposing that Shanghai, China's financial hub, embrace digital technology as it beefs up its systems in payment and settlement.
Lu also vowed to further open China's capital markets, including bond markets, with plans to consolidate investment channels for foreign investors, he said.
China also plans to reduce red tape in an outbound investment scheme in Shanghai called the Qualified Domestic Limited Partnership scheme - which allows foreign asset managers to raise money locally for overseas investment - and is studying the rollout of yuan interest rate options, Lu said.
China is stepping up its financial opening amid a bruising trade war with the United States, which has complained of barriers for foreign companies wanting to do business in the country. (Reporting by Samuel Shen and Ben Blanchard; Editing by Lincoln Feast and Kenneth Maxwell)