Beijing’s strict capital controls are delaying belt and road project approvals

China’s strict capital controls are delaying the approval process for mainland companies to finance projects under the government’s “One Belt, One Road” initiative, according to industry players.

“Mainland private companies now need at least three to six months to get approval from Beijing for them to get the money out of the country to finance many of the One Belt, One Road projects,” said Clement Chan Kam-wing, managing director of accounting firm BDO.

“China has not banned such investment but the authorities have demanded more documentation and explanation as to how the money would be used, particularly for large amounts, above US$5 million.”

He said that before the government toughened its rules on capital flight, it could take just two months to get the green light to finance a simple project.

“Beijing does not want companies using these types of investment as an excuse to bring money out of the country to hedge against the loss in the valuation of the yuan. This has naturally delayed the approval process and is likely to continue this year until China reviews its capital control policies.”

The yuan’s 7 per cent deterioration last year against the US dollar spurred many companies to go on a shopping spree overseas to park their currency offshore as a hedge. That prompted China’s currency regulator to enforce stricter scrutiny of overseas payments exceeding US$5 million, and to ban deals of more than US$1 billion that are deemed to be “outside the investor’s core business”, according to regulatory documents.