China Eases Capital Controls
The easing of capital controls is said to follow a boost in confidence, but more likely the currency controls were eased because they were hurting confidence. Whether they work or not, capital controls are a sign of weakness, not strength.
With less incentive for capital flight and the economy on steadier footing, China’s foreign exchange reserves have clawed back above the closely watched $3 trillion level.
Premier Li Keqiang said on Tuesday that market confidence in the yuan has significantly improved, Xinhua news agency reported.
As of last week, the People’s Bank of China (PBOC) is no longer demanding that banks match outflows with equal inflows, the sources said.
…”This particular move won’t help on real M&A deals…It’s like the brakes aren’t totally locked up any more, but the foot is still on the brake pedal pretty hard,” said Burch.
iFeng: 媒体：央行适当放松跨境资金管理 收付限制不严格执行
A foreign-line trader believes that regulation may also be due to the implementation of the challenges or business complaints, because the foreign exchange situation is still quite tight, capital outflow control is still very strict.
The People’s Bank of China in early January required commercial banks to stop processing cross-border yuan payments unless the banks could show at the end of every month that the amount of outbound yuan matched the sum that came in, but that restriction was scrapped from last Wednesday, said mainland banking sources who were briefed on the policy change.
After the policy relaxation, banks can now freely process outbound yuan payment and remittance requests from their corporate and individual clients, a move that is expected to help boost liquidity in offshore yuan markets, especially Hong Kong.