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Prepare For More Chinese Capital Controls As Exodus Worsens

By George Lei, Bloomberg Markets Live commentator and reporter

Strict capital controls made it impossible for several European companies to send dividends abroad and a Japanese beverage maker could not get paid due to “tougher restrictions on cross-border wire transactions.” This is not Russia in 2022, but China in late 2016 and early 2017, when the yuan plunged toward 7 per dollar.

Those types of curbs could soon be brought back as part of Beijing’s arsenal to manage currency depreciation, especially in a context similar to 2016-17: Once again, the Fed hikes and capital flees. Besides the headline exchange rate, how much and how quickly money can leave China will become equally, if not more, important.

Global portfolio managers, foreign businesses and the local rich are either leaving China or bringing much less capital onshore. The nation suffered an unprecedented outflow from bond and stock investors in March and net selling continued into April, according to estimates from the International Institute

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