China has tightened its capital controls, in a sharp reversal of its market liberalising rhetoric, as it struggles to contain the fallout from last month’s devaluation of the renminbi.
The August 11 devaluation unleashed turmoil on global stock markets and policy confusion at home, forcing the central bank to spend as much as $200bn to support the renminbi. The prospect of an interest rate rise in the US has further encouraged capital flight.
The State Administration of Foreign Exchange, the unit of the central bank in charge of managing China’s currency, has in recent days ordered financial institutions to step up checks and strengthen controls on all foreign exchange transactions, according to people familiar with the matter and an official memo seen by the Financial Times.