China’s capital controls ‘can harm currency, global ambitions’
Tighter control of yuan undermines Beijing’s aim to create a global reserve, say analysts
China’s latest efforts to impose stricter control on capital outflows, especially on the yuan, are set to hurt its goals of creating an international currency and expanding the nation’s global influence, analysts say.
The Chinese central bank and foreign exchange regulators have made the decisions behind closed doors and declined to confirm the new rules that are circulating on social media applications and grabbing news headlines, raising questions over the transparency of Chinese policymaking.
Tighter control over yuan flows into overseas markets and outbound investment projects undermine Beijing’s own ambition of creating an international currency and expanding China’s business presence abroad, according to analysts.
“In order to become a reserve currency, the markets have to trust the authorities,” Paul Gruenwald, the chief Asia-Pacific economist for S&P Global Ratings, said at a briefing.
While China has the ambition to make the yuan a reserve currency, “it’s not uniformly moving towards a reserve currency” and China’s ambition is “many, many years away”, he said.