Beijing may relax Chinese capital restrictions to soothe investor fears

Yuan and DollarChinese capital restrictions: China’s financial regulators may relax restrictions on both capital inflow and outflow for foreign funds in a bid to restore the confidence of foreign investors after Beijing’s recent capital account tightening fuelled concerns, industry insiders say. China’s central bank plans to loosen rules governing when foreign investors can bring money in and out of the country in a signal of its commitment to further open financial markets. The rule changes would apply to funds under the Qualified Foreign Institutional Investor (QFII) programme, which has granted about $81bn in quotas for overseas investment in China’s domestic stocks and bonds, Bloomberg cited unnamed sources this morning.
The news comes 24 hours after Beijing unleashed a new rule to curb capital outflows. Mainlanders using UnionPay debit and credit cards to purchase insurance products overseas will face caps of US$5,000 per transaction, effective from Thursday.Thomas Fang Dongming, head of China equities at UBS and its QFII representative, said it was “very likely” that the Chinese authorities would relax restrictions for QFII capital inflows and outflows.
“The relevant QFII regulators in China have been working to loosen control on this field, to make China’s equity markets more accessible,” he said. “It is still one of the top priorities to internationalise China’s capital markets, and the regulators have been pushing for A share’s inclusion in reputable global indices, although things have become a little tougher recently with China facing bigger capital outflow pressures.”
Under the current rules, a foreign investor with a QFII licence is subject to a monthly quota and window to withdraw their investment or earnings, an industry insider said.

Source: scmp