Chinese corporate chiefs are turning vocal critics of the nation’s capital controls as the pile of scrapped deals grows.
While the restrictions have helped alleviate pressure on the yuan, they have also curbed overseas acquisitions.
Executives in Beijing during the National People’s Congress bemoaned the measures, saying they are derailing expansion abroad — a key tenet of China’s long-term economic ambitions.
“It is almost impossible to use the yuan to invest in overseas projects,” Citic Capital Holdings Ltd (中信資本) chairman and chief executive Zhang Yichen (張懿宸) told reporters on the sidelines of a meeting of China’s political advisory body that runs concurrent to the congress. “To say that capital controls do not have any impact — it is a lie.”
Creat Group Corp (科瑞集團) chairman Zheng Yuewen, (鄭躍文) said separately that “foreign-exchange management is so strict now that it is almost impossible to move funds out.”
Guangzhou R&F Properties Co (廣州富力地產) joint chairman Zhang Li (張力) said “we see a lot of good projects overseas,” but at the same time “the capital controls are very strict now” and it is difficult to transmit funds abroad.
The complaints reflect a tumble in foreign deals, with the US$19 billion of acquisitions abroad announced by Chinese companies so far this year amounting to a 74 percent drop from a year earlier, according to data compiled by Bloomberg.
The blow has seen Chinese executives join their foreign counterparts in criticizing the restrictions.
European companies have charged that the capital controls are disruptive.
The Chinese government faces a balancing act in trying to stoke domestic companies’ influence on the international stage, while avoiding the kind of bad investments that Japanese firms became famous for in the 1980s. The more immediate concern has been record outflows of capital that have only diminished after a steady tightening in oversight of and limits on cross-border transactions.
Three straight years of capital outflows and yuan declines spurred authorities to ramp up controls in the second half of last year. The measures have paid off — in December last year, the capital account saw its first net inflows since a mini-devaluation of the yuan in August 2015 — but the danger is that there has been collateral damage to businesses.
“The door is almost shut for funds going out,” Zheng said. “When there are good targets overseas, our units offshore would get involved first and then when we came back to seek approvals, some government department would ask: ‘Why didn’t you report it first,’ but if we reported it in the first place it would be impossible for us to proceed.”
Dalian Wanda Group Co’s (萬達集團) US$1 billion bid for US company Dick Clark Productions Inc was one transaction to hit a roadblock last month, when the Chinese conglomerate struggled to get the money to pay for the deal out of China, people familiar with the matter said.
Similarly, Barrick Gold Corp’s sale of a stake in an Australian mine stalled as the Chinese bidder faced delays securing financing, as well as regulatory clearance.
It is not clear what bearing the executives’ complaints might have on policy, in a year when Chinese President Xi Jinping (習近平) is focused on consolidating his power at a Chinese Communist Party gathering this autumn.
David Cui (崔偉), a Bank of America Corp strategist in Singapore, said in a research note that “we consider the likelihood of any significant change to the renminbi [yuan] regime before the [hinese Communist] Party Congress fairly low” if capital outflow pressures persist.
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