China added new restrictions on pulling yuan out of the nation as authorities seek to prevent a flood of capital outflows from destabilizing the financial system.
Officials will not approve requests to take the yuan overseas for the purpose of converting into foreign currencies unless applicants provide a valid business reason, people familiar with the measures drafted by China’s central bank said.
The monetary authority has noticed that funds are increasingly leaving the country as yuan payments, said the people, who asked not to be named because they were not authorized to disclose the measures.
China is throwing up fresh administrative roadblocks to contain capital outflows before a likely US interest-rate increase next month and the reset of Chinese citizens’ US$50,000 annual foreign-exchange quotas next month.
The equivalent of US$275 billion exited the country via yuan payments this year through October, versus a US$101.5 billion inflow in the same period last year, as the Chinese currency weakened to an eight-year low against the US dollar.
“The underlying depreciation pressure on the yuan has picked up enough to cause alarm,” said Sean Callow, a senior strategist at Westpac Banking Corp in Sydney. “The People’s Bank of China has lots of weapons at its disposal, so they should be able to slow the pace of capital outflows and thus relieve the pressure on the yuan in the short term, but if it is true that new restrictions are being imposed on capital flows, then it is a setback for the long-term plan to open up China’s financial markets and internationalize the yuan.”
The new measures, which follow a raft of other steps this year to restrain outflows, suggest that China is placing more emphasis on preserving foreign-exchange reserves than targeting a particular level for the yuan, said Raymond Yeung (楊宇霆), lead greater China economist at Australia & New Zealand Banking Group Ltd in Hong Kong.
After keeping the currency steady at about 6.7 yuan per dollar from July through September, the central bank has since allowed the currency to weaken beyond 6.9, a level last seen during the global financial crisis in 2008.
Meanwhile, foreign-exchange reserves declined last month by the most since January.
“It is smart to use administrative measures to reduce capital outflows and defend the exchange rate, because China’s foreign reserves are dropping,” said Ken Cheung, a Hong Kong-based Asia currency strategist at Mizuho Bank Ltd. “Chinese authorities understand the capital outflow pressure is persisting, but will only let it run its course at an orderly pace.”
China also will further standardize companies’ outbound direct investment, bolster inspections on whether deals are real and develop a system for firms to report big cross-border fund movements in advance, the people said.
The People’s Bank of China did not immediately reply to a fax seeking comments.
BUSINESS UPDATE: The iPhone assembler said operations outlook is expected to show quarter-on-quarter and year-on-year growth for the second quarter Hon Hai Precision Industry Co (鴻海精密) yesterday reported strong growth in sales last month, potentially raising expectations for iPhone sales while artificial intelligence (AI)-related business booms. The company, which assembles the majority of Apple Inc’s smartphones, reported a 19.03 percent rise in monthly sales to NT$510.9 billion (US$15.78 billion), from NT$429.22 billion in the same period last year. On a monthly basis, sales rose 14.16 percent, it said. The company in a statement said that last month’s revenue was a record-breaking April performance. Hon Hai, known also as Foxconn Technology Group (富士康科技集團), assembles most iPhones, but the company is diversifying its business to
ARTIFICIAL INTELLIGENCE: The chipmaker last month raised its capital spending by 28 percent for this year to NT$32 billion from a previous estimate of NT$25 billion Contract chipmaker Powerchip Semiconductor Manufacturing Corp (力積電子) yesterday launched a new 12-inch fab, tapping into advanced chip-on-wafer-on-substrate (CoWoS) packaging technology to support rising demand for artificial intelligence (AI) devices. Powerchip is to offer interposers, one of three parts in CoWoS packaging technology, with shipments scheduled for the second half of this year, Powerchip chairman Frank Huang (黃崇仁) told reporters on the sidelines of a fab inauguration ceremony in the Tongluo Science Park (銅鑼科學園區) in Miaoli County yesterday. “We are working with customers to supply CoWoS-related business, utilizing part of this new fab’s capacity,” Huang said, adding that Powerchip intended to bridge
Microsoft Corp yesterday said that it would create Thailand’s first data center region to boost cloud and artificial intelligence (AI) infrastructure, promising AI training to more than 100,000 people to develop tech. Bangkok is a key economic player in Southeast Asia, but it has lagged behind Indonesia and Singapore when it comes to the tech industry. Thailand has an “incredible opportunity to build a digital-first, AI-powered future,” Microsoft chairman and chief executive officer Satya Nadella said at an event in Bangkok. Data center regions are physical locations that store computing infrastructure, allowing secure and reliable access to cloud platforms. The global embrace of AI
Qualcomm Inc, the world’s biggest seller of smartphone processors, gave an upbeat forecast for sales and profit in the current period, suggesting demand for handsets is increasing after a two-year slump. Revenue in the three months ended in June will be US$8.8 billion to US$9.6 billion, the company said in a statement Wednesday. Excluding certain items, earnings will be US$2.15 to US$2.35 a share. Analysts had projected sales of US$9.08 billion and earnings of US$2.16 a share. The outlook signals that the smartphone market has begun to bounce back, tracking with Qualcomm’s forecast that demand would gradually recover this year. The San