China relaxes capital controls on stronger yuan
After dropping 6.5% versus the dollar last year, the yuan has defied expectations of further devaluation, up nearly 1% this year
Chinese Premier Li Keqiang said on Tuesday that market confidence in the yuan has significantly improved, in a sign that Beijing is getting the message from investors. A Reuters poll from earlier this month showed that bullish bets on the yuan may have risen to their highest level since July 2015.
China’s foreign exchange reserves are back up above US$3 trillion, as incentives for capital flight have diminished. In response the People’s Bank of China is no longer requiring banks to match outflows with equal inflows, reports the South China Morning Post.
The restriction, imposed in January, prevented banks without sufficient surplus of yuan payments from transferring foreign firms’ profits overseas, according to one Shanghai banking source.