China’s capital controls trigger a backlash

SHANGHAI: Chinese corporate chiefs are turning vocal critics of the nation’s capital controls as the pile of scrapped deals grows.

While the restrictions have helped alleviate pressure on the yuan, they’ve also curbed overseas acquisitions.

Executives in Beijing during the National People’s Congress bemoaned the measures, saying they’re derailing expansion abroad – a key tenet of China’s long-term economic ambitions.

“It’s almost impossible to use the yuan to invest in overseas projects,” Zhang Yichen, chairman and chief executive officer of investment firm Citic Capital Holdings Ltd, told reporters on the sidelines of a meeting of China’s political advisory body that runs concurrent to the NPC.

“To say that capital controls don’t have any impact – it’s a lie.”

Zheng Yuewen, chairman of Chinese drugmaker Creat Group Corp, said separately that “the foreign-exchange management is so strict now that it’s almost impossible to move funds out.” Zhang Li, co-chairman of Guangzhou R&F Properties Co, said that “we see a lot of good projects overseas.” But at the same time “the capital controls are very strict now” and it’s difficult to transmit funds abroad, he said.

The complaints reflect a tumble in foreign deals, with the US$19bil of acquisitions abroad announced by Chinese companies so far this year amounting to a 74% drop from a year ago, according to data compiled by Bloomberg.

The blow has seen Chinese executives join their counterparts abroad in criticising the Communist leadership’s restrictions.

China’s leadership faces a balancing act in trying to stoke domestic companies’ influence on the international stage while avoiding the kind of bad investments that Japanese firms became famous for in the 1980s.

The more immediate concern has been record outflows of capital that have only diminished in recent months after a steady tightening in oversight of and limits on cross-border transactions.