China’s forex regulator unveils new channels to attract capital inflows

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China’s State Administration of Foreign Exchange is seeking to expand channels to attract capital back to China. Photo: EPAe

Published: 10:02pm, 26 Jan 2017Updated: 11:02pm, 26 Jan 2017

China has ramped up measures to enable funds to flow back within its borders, in what analysts say is an attempt to combat capital flight and the downward pressure on the yuan.

Offshore loans secured by domestic guarantee can be repatriated to China to facilitate domestic companies’ cross-border financing and investment, the State Administration of Foreign Exchange said in a statement posted on its website on Thursday.

The new steps, posted on the last working day ahead of the Lunar New Year holiday on the mainland, reflect Beijing’s efforts to better balance capital flows.

Offshore loans secured by domestic guarantee have been used in the past to encourage domestic companies to invest offshore. Allowing the capital to be repatriated means Beijing is encouraging the flow the other way around, analysts said.

The nation’s forex regulator also granted more leeway for multinational companies to make use of offshore foreign exchange for onshore use. Multinationals are allowed to tap 100 per cent of the offshore foreign currency deposits for domestic operation, up from a cap of 50 per cent previously.

The foreign exchange regulator also clarified that domestic companies have to make up for their previous losses before they can transfer the current year’s profits offshore, adding figures than US$50,000 must be vetted with supporting documents.

The forex regulator said such measures aim to “deepen foreign exchange management reform, cut red tape, support the growth of real economy and facilitate trade and investment.”