Asia: Fears of heightened capital controls prompt Chinese Yuan outflows

By Eunice Koh, RFi Group

In order to offset capital outflows, which are partially due to the expectation of a weakening Chinese Yuan, the Chinese government has put in place stringent capital controls which looks to closely monitor the foreign currency transactions and restrict purchases of insurance products in Hong Kong. The measures taken to retain the currency onshore have sparked fears and uncertainties, prompting quicker offshore transfers of Chinese Yuan as well as boosting illicit financial flows through underground banking and fake trade invoicing.

According to RFi Group data, about 46% of Chinese banked consumers are very concerned about the how the Chinese economic outlook may impact them over the next 12 months. For banked consumers who hold offshore investments and savings, the concern about the Chinese economic outlook is one of the top reasons why they hold banking products overseas.

While money changers and remittance providers stand to benefit from the surge in offshore Yuan transfers, some are seeking to increase profits from other currencies for fear that the government will enact further capital controls.

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