China to impose tighter controls on outbound investment

Posted on November 29, 2016

China’s government is poised to impose tighter restrictions on outbound foreign investment, in a bid to curb capital outflows that are putting downward pressure on the renminbi exchange rate and draining foreign exchange reserves, according to sources.

The State Council, China’s cabinet, will ban outbound investment deals worth more than $10bn or mergers and acquisitions above $1bn if they are outside the Chinese investor’s core business, according to two sources who have seen a draft document outlining the new rules. State-owned enterprises will also not be allowed to invest more than $1bn in foreign real estate, according to the sources, writes Gabriel Wildau in Shanghai.

Separately, the State Administration of Foreign Exchange, which approves conversion of renminbi into foreign exchange, also held meetings with bankers in multiple cities to inform them of new approval requirements for large outbound deals, China Business News reported late on Monday.

China’s foreign dealmaking has surged this year. Non-financial outbound investment by Chinese companies has totaled $146bn through the first ten months of 2016, above the record-high $121bn total for all of 2015.

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