What next for Chinese yuan after Brexit? ‘Yes’ to devaluation. ‘No’ to capital outflows

Although China will have to devalue the yuan in line with other Asian and emerging market currencies in the wake of Brexit, authorities are determined to control the pace of the depreciation and still see curbing capital outflows as the No 1 priority for now, analysts said.

In a sign of the challenges ahead, Shan Liew, owner of the 88 Estate Agency in London, said she has sold apartments to three Chinese buyers since last Friday when Britons voted to leave the European Union, a shock move that saw the British pound plunge to a 30-year low.

“Chinese investors, including those from Hong Kong and the mainland, are becoming even more interested in London properties after the Brexit as the more favourable exchange rates make buying cheaper. Many people who were sitting on the fence in the last few months are about to jump in now,” Liew said.

However, for those who didn’t have the foresight to move enough money outside China before Beijing tightened checks on cross-border fund flows starting late last year, purchasing a property on the overseas market is a tougher job.

“An alternative is to apply for a mortgage from local banks, while repaying it by using the rent or utilising a Chinese citizen’s annual quota of US$50,000 for offshore investment,” Liew said, noting that she had secured a mortgage for a buyer from Beijing.

But this approach doesn’t work for high-end properties which require bigger payments.