By Philip Wen
China's central government has ordered tighter controls on offshore investments made by state-owned enterprises amid concerns over accelerating capital outflows.
In a statement issued on Wednesday, China's State Council, or cabinet, said it would establish stricter supervision on the acquisition and financing of state assets overseas, including changes in shareholdings, to ensure "the safe operation of overseas assets and to increase the value of assets".
The move comes amid an environment where Beijing has stepped up efforts to control the flow of money offshore, with a resurgence of outflows in recent weeks weakening the Chinese yuan, adding to concerns about the resilience of the world's second-largest economy.
There are growing government concerns that overseas acquisitions are being used to disguise capital flight, with authorities also curtailing options for individuals to invest overseas. Contemporaneous crackdowns on underground banks and foreign casinos – including Australia's Crown Resorts – have also been linked to China's increased scrutiny on capital flows.
Beijing has stepped up efforts to control the flow of money offshore, with a resurgence of outflows in recent weeks weakening the Chinese yuan.Credit: Bloomberg
While China's foreign-exchange reserves remain over $US3 trillion ($4 trillion), net outflows have reached record levels and the yuan has fallen to eight-year lows against the greenback.
While details of specific curbs were not contained in the State Council's statement, the Wall Street Journal and Bloomberg have reported the government planned to suspend most foreign investment deals worth $US10 billion or more. It would also restrict overseas investments of at least $US1 billion for companies making acquisitions outside of their core business, as well as foreign real estate deals of more than $1 billion.
The curbs would last until the end of September 2017, Bloomberg reported, adding that regulators would pay extra attention to deals by highly leveraged firms and companies with poor return on assets.
Several government agencies have issued public statements this week to flag the greater scrutiny, including SAFE, the foreign exchange regulator, which said it would step up efforts to authenticate outbound investments and crack down on fake overseas transactions.
Chinese outbound direct investment was up 53 per cent to $145.96 billion year-on-year in October, according to China's Commerce Ministry.