China is signaling that it’s not letting record outflows this year deter capital-market reforms.
The central bank is finalizing revisions to its foreign-exchange rules that would loosen some capital controls while preserving its ability to intervene in times of volatility, people familiar with the matter said on Monday. The monetary authority said Friday that it will consider a trial program in the Shanghai free-trade zone, allowing residents to buy overseas assets directly and opening up yuan-denominated bonds to trading by foreign companies. Other initiatives include permitting Chinese firms to trade derivatives and establishing securities joint ventures with international companies.
The measures were announced in the face of an unprecedented exodus from China following a surprise devaluation in August and a two-month-long stock-market rout. Investors pulled $194 billion from the country in September, extending this year’s outflow to $669 billion, according to data compiled by Bloomberg.
“A lot of people suggested that if the economy slows, if there’s more volatility, the Chinese will drop the reforms,” said Andy Rothman, a San Francisco-based investment strategist at Matthews Asia, which manages $26 billion in assets including Chinese stocks. “I don’t think that’s the way the Chinese government views it. They are not worried about the scale of the outflows.”