Panic over nothing: China says no issue with remitting abroad
Effort to reassure foreign companies that the door is open for them to remit dividends out of the country comes after reports in Europe of difficulties following the introduction of new exchange controls
A senior Chinese foreign exchange official has reiterated that there are no restrictions on foreign firms’ cross-border profit transfers.
The effort to reassure foreign companies that the door is open for them to remit dividends back to their headquarters comes on the heels of reports that various European-based multinationals have had extreme difficulties taking year-end profits out of China.
China’s exchange rate came under significant pressure at the end of 2016 as capital outflows gushed, prompting an even greater panic among yuan holders to get money out of the country.
The Financial Times stirred anxiety among foreign investors after reporting on December 7 that several European companies in China had been unable to remit dividends abroad following the introduction of new exchange controls designed to curb capital flight.
In late November, the SAFE started requiring banks to apply for its approval on any cross-border payment, while also setting outflow/inflow quotas to which banks had to adhere.
Several Swedish multinationals – including SKF, Getinge and Stora Enso – interviewed by the business daily Dagens Industri on January 12 said they were experiencing difficulties transferring profits out of China in a way not seen in decades.
“Almost all companies we have been in contact with have been affected,” said Johan Andrén, head of the Swedish bank Handelsbanken in Hong Kong. “It’s not a total stop to the transfer of dividends but its increasingly difficult and more bureaucratic.” The new exchange controls were a delaying tactic from China to slow the decline in the country’s foreign exchange reserves, he added.
According to the China Daily, Pan Gongshen, Deputy Governor of the People’s Bank of China and head of the State Administration of Foreign Exchange (SAFE), told Joerg Wuttke, president of the EU Chamber of Commerce in China, in a meeting on Monday, that China would “maintain the continuity and consistency of its forex policies.”
Pan was also quoted, in a SAFE statement released on Tuesday, that China would make foreign trade and investment more convenient and support Chinese companies’ outbound investment as long as it was “authentic and compliant”.
A statement from the European Chamber of Commerce in China reported that Pan “stressed that China will not retract its existing opening-up policies and that it will stick to its pledge of RMB cross-border opening up, honouring the IMF’s recognition of China’s reform process with its inclusion of the RMB in its special drawing rights basket of currencies last year.”