Foreign firms hit by China's tighter capital curbs

BEIJING • Tighter rules in China on outbound capital flows have raised barriers for European and US companies wanting to get money out of the country, two business lobbies said yesterday, with one saying dividend payments had been affected.

Chinese regulators have tightened curbs on foreign exchange transactions and outflows in recent weeks amid growing concern that outflows are adding to pressure on the weakening yuan.

The foreign exchange regulator gave window guidance to banks last week to "control the capital outflow from China" by tightening approval requirements on cross-border transfers from capital accounts and dividend payments, the European Union Chamber of Commerce in China said in a statement.

The tighter rules affect transfers of amounts above US$5 million (S$7 million), regardless of whether the payment is in yuan or a foreign currency, the chamber said.

The yuan has lost nearly 6 per cent against the resurgent US dollar so far this year, taking it to more than eight-year lows. Sources said last week that the State Administration of Foreign Exchange had begun vetting transfers abroad worth US$5 million or more and was increasing scrutiny of major outbound deals.

The American Chamber of Commerce in China said it was aware of the steps to further manage capital outflows, and was "concerned about the added burden such approval requirements may potentially have on our member companies' ability to move money overseas".

The tighter rules have raised concerns among domestic and foreign companies that they will not be able to move funds easily out of the country, potentially disrupting business activity.

Meanwhile, China's foreign exchange reserves have fallen as the authorities struggled to stem capital outflows and shore up the sliding yuan in the face of a relentlessly rising greenback.

Reserves fell by US$69.06 billion last month, the fifth straight month of declines, to US$3.052 trillion, levels not seen since March 2011, central bank data showed yesterday.

Last month's drop was the largest since January.

REUTERS

A version of this article appeared in the print edition of The Straits Times on December 08, 2016, with the headline 'Foreign firms hit by China's tighter capital curbs'. Print Edition | Subscribe