CHINA-ECONOMY:CONTROLS ON OUTBOUND INVESTMENTS

 The Financial Times on December 2, 2016, said China intends to scrutinise acquisitions of overseas companies costing more than $1bn if they are outside the investors’ core business scope. Meanwhile, SoEs will not be allowed to invest more than $1bn on a single real estate transaction abroad. Gold purchases are also being curbed.

With outbound investments from Chinese corporations running at US$ 150 bn in the first 10 months of this year, up from US$ 121 bn last year, such outflows are increasingly being seen as part of a complex of problems that have driven down China’s stockpile of foreign exchange reserves from almost US$ 4 tn in early 2014 to US$ 3.12 tn in October 2016.Outflows of even as much as $1tn may not seem too debilitating when set against China’s proven capacity to generate plentiful supplies of money. But the fact that Beijing is taking action reveals the knife-edge upon which Chinese policymakers are balancing.
 






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