China forex regulator tightens controls to stem capital outflows-sources

SHANGHAI/ HONG KONG: China is stepping up measures to stem capital outflows after the yuan currency skidded to more than eight-year lows, taking aim at outbound investment, sources said on Tuesday.

The State Administration of Foreign Exchange (SAFE) has begun vetting transfers abroad worth US$ 5 million or more and is stepping up scrutiny of major outbound deals, including those with prior approval, sources with knowledge of the new rules said.

Capital outflows through both legal and illegal channels have added pressure to the yuan’s slide. The Chinese currency has lost nearly six per cent of its value against the dollar so far this year.

Sources said the forex regulator told banks about the new rules on Monday, the same day the government said it would stick to its “going out” strategy of encouraging outbound investment.

SAFE did not respond to a Reuters request for comment.

“Previously, only forex transfers worth US$ 50 million or more needed to be reported to SAFE. Now, the threshold has been drastically lowered to US$ 5 million, and covers both foreign currency and yuan,” said one of the sources with direct knowledge of the rules.

“All we can do is to ask clients to be patient, and tell them that the transaction is being vetted by SAFE for authenticity and may not be approved.” — Reuters