China’s central bank to crack down on capital flight in Shanghai free trade zone reform drive

China’s central bank will crack down on capital flight and closely monitor abnormal capital flows as it pushes financial reforms in Shanghai’s free trade zone (FTZ), a senior official said yesterday.

Shanghai will strive to expand net money inflows through FTZ accounts, with many Chinese banks offering incentives to individuals and companies to convert US dollars into yuan.

Zhang Xin, deputy head of the People’s Bank of China (PBOC) Shanghai headquarters, told a news conference on Wednesday that the central bank would step up anti-money laundering efforts, and “under the current circumstances, will strengthen crackdowns on foreign currency flight and step up monitoring abnormal capital flows”.

The yuan has lost more than 3 per cent of its value against the dollar since the end of September, pushed down by a resurgent dollar that has gained further strength since the surprise election success of US President-elect Donald Trump.

In a report on Tuesday, Capital Economics estimated that capital outflows in October were the largest since January, and posed a threat to China’s exchange rate regime.