China’s tighter controls on capital result in major drop in outgoing investment

The Chinese government’s tightened controls on capital as it struggles with a sluggish economy will likely impact nations, especially emerging economies, and companies outside the massive country, according to a report by risk consultants Steve Vickers & Associates.

The report reveals that the authorities’ grip on the deployment of capital saw outgoing investment slowing in 2016, and in Q1-2017 restrictions resulted in a significant decline of 74 percent in outgoing investment capital.

Enforcement activities within China have shut down many underground banks, and in Macau police have curtailed the use of cross-border sales terminals, the report noted.

“Payment risk is now a serious threat. Chinese companies are struggling to transfer funds, meaning investors expecting dividends from shares or repayments on bonds could see delays in settlement, or even default. Companies dealing with Chinese manufacturers or exporters may also face payment difficulties,” the consultancy said.

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