China requires some banks to tightens grip on capital outflows - sources

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Chinese regulators are imposing limits on cross-border flows from yuan-denominated capital pools and requiring intensified checks on related transactions, people with direct knowledge told Reuters, as Beijing moves to restrict capital outflows fleeing a falling currency.

Financial regulators have asked banks in coastal cities to strictly abide by regulations on cross-border outflows from their yuan-denominated capital pools, they said, and imposed the requirement that at no time can outflows exceed the size of those pools, resulting in a negative position.

The regulators also ordered banks to conduct strict checks on corporate business and transactions affecting those yuan capital pools, the people said.

It is unclear whether the policy will be implemented nationwide or will remain selective.

The people declined to be identified because they are not allowed to speak to the media.

The State Administration of Foreign Exchange declined to comment and the People's Bank of China did not respond to Reuters' request for comment. Repeated calls to the central bank were unanswered.

The step is among a series of measures taken by Chinese regulators to tighten regulations to repress speculation on yuan depreciation and to reduce the risk that rapid capital outflows could destabilise the country's money supply.

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