China steps up scrutiny of illegal foreign exchange flows as market opening accelerates
- China is accelerating efforts to generate capital inflows and internationalise the yuan by opening its capital markets
- Strong foreign capital inflows could help Beijing resist US decoupling, but may put downward pressure on the yuan
China is stepping up scrutiny of illegal foreign exchange flows amid concern they could cause destabilising swings in the yuan and domestic financial markets, analysts said.
The nation’s currency regulator, the State Administration of Foreign Exchange (SAFE), announced last week it would strengthen supervision and standardising procedures, as well as punish firms and individuals for illegal foreign exchange acts that threatened state or commercial secrets and personal privacy.
In addition, lower-level foreign exchange bureaus are urged to report large cases to more senior departments.
Amid tense US-China relations, Beijing will intensify efforts to internationalise the yuan and open up capital markets in a multipolar world
Two-and-a-half years after global index provider Bloomberg Barclays announced yuan-denominated government bonds would be included in its Global Aggregate Index, FTSE Russell on Thursday said Chinese bonds would be added to its World Government Bond Index in October 2021.
Beijing also announced on Thursday it would grant fresh quotas under its outbound Qualified Domestic Institutional Investor (QDII) scheme, allowing domestic investors, including banks, security companies, asset management firms, insurance companies and trust companies to invest in offshore securities.
SAFE stopped issuing QDII quotas in April 2019 due to concerns over capital outflows and depreciation pressure on the yuan’s exchange rate.