China's capital exodus prompts the city of Beijing to reassure foreign investors who make 'authentic and compliant' transactions.
In a bid by local authorities in China to retain foreign investors and attract more of them to the world's second-largest economy, Beijing city plans to ease up on strict capital controls and establish a fast-track mechanism to review cross-border data flows. If such transactions are 'authentic and compliant' with Chinese regulations, according to the draft regulation released by the Beijing Municipal Commerce Bureau on Wednesday. The legitimately earned revenue of foreign, Hong Kong, Taiwan and Macau employees, including salaries and other income, would be allowed to be transferred overseas. City officials are asking for public feedback on the proposal, which will be finalized on October 20.
But Ding Shuang, chief economist of Standard Chartered Bank, described the move as just a reassurance. Ding said the two sides were working together on repairing the damage done by the explosions. In recent years, foreign companies have expressed concerns about the mixed playing field in China, and in recent years their list of gripes has expanded to include the country's disruptive Covid controls, China-US tensions, and policy uncertainties regarding anti-espionage and data-security laws. In recent years, strict capital controls have been viewed as a hurdle to investing in China. In July, foreign direct investment dropped by 9.8 percent, in US-dollar terms, from a year earlier to US$111.8 billion, the ministry said. The Institute of International Finance, a US-based organization, said August saw the biggest-ever monthly outflow of overseas investment from the A-share market. The capital city also plans to set up a fast-track mechanism for outbound data and will make a list of data that can flow freely, the draft regulation said. American funds manager Mark Mobius, a billionaire investor, said he couldn't move his money out of China due to its strict capital controls, but China's forex regulator US firms also reported the lowest optimism over China's economic prospects due to regulatory uncertainties, deteriorating bilateral relations and escalating geopolitical risks, according to a survey released by the American Chamber of Commerce in Shanghai this week. China's top leadership has been stepping up efforts to gain back overseas investors in recent months. Last month the State Council launched a program to attract overseas firms, such as offering tax incentives and allowing companies to apply for business visas. On Monday, China's central bank, including JPMorgan, HSBC, Deutsche Bank and Tesla, pledged to optimize policy support.