China's Capital Controls

UBS analyzes China's recent regulatory crackdown on capital outflows, noting that while oversight of informal channels is intensifying, official cross-border access channels remain encouraged. The firm maintains a bullish outlook on the CNY as capital flight is curtailed.

Key Takeaways

• 1.Beijing is increasing enforcement of capital controls through stricter oversight of offshore brokers and outbound investment.
• 2.The tightening is expected to pressure mainland flows into Hong Kong, but approved cross-border schemes remain supported.
• 3.China's financial opening continues through regulated channels, and the CNY is projected to appreciate against the USD.

Table of Contents

• China's capital controls: Tighter enforcement, selective opening
• Q1: What has changed, and why is the tightening?
• Q2: Who is most affected by tighter enforcement, and who may benefit?
• Q3: Will tighter capital controls slow China's financial opening, and where is the CNY headed?
• Global asset class preferences definitions
• Appendix

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