HK/China Capital Flow Policy: Mixed impacts, clearer framework - gauging implications for CNY and Banks

Research evidence excerpt

HK/China Capital Flow Policy: Mixed impacts, clearer framework - gauging implications for CNY and Banks

ound/outbound financial investments, and continued Branch

progress in RMB internationalization. Peter Zhang

(852) 2800-8557

A holistic view on regulatory changes regarding capital peter.zhang@jpmorgan.com

flows J.P.J.P. MorganMorgan SecuritiesBroking (Hong(AsiaKong)Pacific)LimitedLimited/

• It is not a one-way street: The recently announced update to outbound Lincoln Yu

investment regulations has raised concerns about tighter capital controls. (852) 2800 8523

lincoln.yu@jpmorgan.com

However, over the past 12 months, Chinese policymakers have introduced

J.P. Morgan Securities (Asia Pacific) Limited/

multiple regulatory updates affecting capital flows. Reviewing these measures J.P. Morgan Broking (Hong Kong) Limited

(Table 2-Table 3), we see a mix of relaxation and tightening, with differing Haomin Chen

policy directions and implications for cross-border flows. This reinforces our (86-21) 6106 6347

view that the latest developments are less about cracking down on capital haomin.chen@jpmorgan.com

outflows and more about building a comprehensive governance framework for SAC Registration Number: S1730524080002

managing capital flows. J.P. Morgan Securities (China) Company

Limited

• What’s been relaxed? Key points include the following: 1) On cash

management for multi-national companies operating in China, they have more

flexibility in currency conversion and fund management for their RMB and FX

liquidity onshore and offshore. 2) On onshore corporates extending loans

overseas, regulators increased the quota, and require lender companies to make

filing instead of getting approval from SAFE. 3) The PBOC and HKMA