Opinion | China signals real financial opening up, but will it follow through?

A Chinese foreign exchange official said on Friday that Beijing will “study” a plan to allow all mainland residents to invest in offshore securities and insurance policies up to an annual limit of US$50,000.

For decades, China has barred its people from freely investing in offshore financial assets. Every Chinese citizen is given a nominal annual quota of US$50,000 to change yuan into foreign currencies for purposes such as overseas travel or education expenses, but purchases of stocks, bonds, insurance policies and properties remain off limits – at least on paper.

The restrictions have created a vibrant underground market for smuggling money out of China. Beijing has sometimes turned a blind eye to such outflows when it feels there was too much hot money flowing into domestic markets, putting pressure on the yuan to rise. But it could be ruthless if it felt an exodus of funds was threatening financial stability.

China already has certain tightly controlled mechanisms for onshore investors to access offshore assets, including the Stock Connect link between Hong Kong and Shanghai. But for a mainland investor, such schemes usually do not involve real money exchanges – putting yuan in and taking yuan out.