China’s Central Bank relaxes policy on cross-border yuan payments

China’s Central Bank relaxes policy on cross-border yuan payments

19/04/17

Melanie Ullrich, Business and Policy Programme Manager

The South China Morning Post reports that China has taken a step to relax its controls over yuan outflows. In January this year, the People’s Bank of China required commercial banks to stop processing cross-border yuan payments unless the banks could show at the end of every month that the amount of outbound yuan matched the sum that came in. As of last week, the PBOC is no longer demanding this.

Beijing’s restriction of the use of its currency has suffocated the development of offshore yuan markets. In addition, Chinese and foreign businesses complained about these measures which held off Chinese investment abroad as well as putting another layer of bureaucracy on repatriating profits to Western HQs.

By abolishing these regulations, Beijing seems to see smaller risk of capital exodus and greater market confidence in the value of the yuan.