China steps up capital controls, tightens investment rules for state firms

Chinese yuan and dollar
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China issued regulatory rules on outbound investments by centrally controlled state firms, the state asset regulator said on Wednesday, the latest move by Beijing to tighten controls on money moving out of the country and stabilize a faltering yuan.

The State-owned Assets Supervision and Administration Commission (Sasac) said it would step up supervision on outbound investments, two documents on its website showed.

The regulator also said it would establish a negative list of investment projects that centrally controlled state firms would not be allowed to invest in. It was not clear if local government firms were excluded from the new rules.

Sasac did not specify which industries would be included on the negative list.

Firms must strengthen risk management and ensure the safety of their overseas assets, the commission added.

The yuan fell nearly 7 per cent last year – its biggest annual loss against the U.S. dollar since 1994 – under pressure from sluggish economic growth and a strong dollar.

As part of efforts to stem capital outflows and stabilize the yuan, the central bank announced late last month that it would introduce new rules on overseas currency transfers from July.

China's outbound investment hit $170 billion last year, up 44 per cent from 2015, the Commerce Ministry said on Monday. Of that total, overseas acquisitions and mergers by Chinese firms stood at $107 billion in 2016.

Anxiety in markets has deepened in recent months as capital outflows picked up pace, forcing authorities to defend the currency and pushing foreign exchange reserves down to $3 trillion in December, the lowest in six years.

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