The yuan’s fall in value had led many individuals and corporates to buy overseas assets to hedge their risk. The Chinese government in Beijing unveiled a series of capital control measures in November, including stricter scrutiny of overseas payments exceeding US$5 million, and banning deals of more than US$1 billion, deemed to be “outside the investor’s core business”.
This shed US$3.96 billion from China’s foreign exchange reserves in March, after rising by US$6.9 billion in February, bringing the country’s currency stockpile to US$3.0091 trillion, data released by the PBOC showed.
“Capital outflows have now stabilised and we expect exchange reserves to ratchet higher in coming months,” Hu added.
“In particular, tighter controls over corporate overseas investments and measures announced recently to encourage capital inflow should boost reserves.”
Stephen Innes, senior trader at foreign exchange site Oanda, said Beijing’s capital control measures have removed any worries held by both mainland policymakers, and foreign investors.
“The launch of the Bond Connect scheme, and the New Silk Road initiative [“Belt and Road Initiative”] probably suggest the PBOC would prefer a strengthening yuan to attract foreign investors,” Innes said. The Belt and Road is China’s plan to fund the building of hundreds of railway and infrastructure projects in 65 countries to promote its trade with Europe and other countries in the Asia-Pacific region.