Some Shanghai Banks Said to Curb Individual Forex Purchases
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Banks said to request close checks by branches for violations
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Shanghai SAFE vows crackdown on illegal foreign transactions
“With expectations for yuan to fall further, there’s still pressure for outflows,” said Liu Dongliang, a Shanghai-based analyst at China Merchants Bank Co. “Capital controls have tightened. The door was widening before, and now it’s leaving little room.”
In a fresh sign of heightened scrutiny, the 21st Century Business Herald reported Thursday that regulators will now review any outbound direct investments of more than $50 million by companies in Shanghai’s free-trade zone before allowing the foreign currency for the transaction to be bought. Previously, currency purchases for investments less than $300 million weren’t reviewed, the newspaper said. The regulator didn’t immediately respond to a faxed inquiry about the report.
In a Jan. 20 statement outlining its focus for the year, SAFE’s Shanghai branch said it would use its systems to conduct off-site inspections as it pledged to “severely crack down on illegal foreign transactions such as underground banking” to curb cross-border capital flows.
Analysts at JPMorgan Chase & Co. said this month that outflows have the potential to become “practically boundless” as they broaden, citing examples such as greater foreign direct investment by China and overseas investors exiting the nation’s equities and bonds.
“As the economy slows and the yuan drops, whether it’s individual or corporates, they will surely have ways to take out their money,” China Merchants Bank’s Liu said. Measures such as the banks’ clampdown on foreign-exchange purchases “will have an effect, but it’s impossible to completely block outflows.”
Source: Bloomberg – Some Shanghai Banks Said to Curb Individual Forex Purchases