How does China control the outflow of foreign exchange?

For some time, "China's capital outflow" has become a hot topic in many media and institutions, among which there are many concerns that "China's capital outflow has intensified". So what are the adverse effects of capital outflow on economic life?

Before capital flowed out, it existed in the form of assets in China, such as stocks, bonds, real estate, entity enterprises and so on. Or simply exist at the interest of our bank (in this case, the interest rate in our country must be higher than the loan interest rate in the country where the funds come from). When large-scale capital flows out, it is bound to be accompanied by the sale of domestic assets, which will bring about a sharp decline in domestic assets. For example, selling real estate, selling stocks and so on.

If the country's foreign exchange reserves are insufficient, that is, when the capital outflow exceeds the country's foreign exchange reserves, because the national central bank can't cash foreign exchange to the fleeing capitalists at the current exchange rate, it can only announce the depreciation of its own currency against foreign currencies, which will further aggravate the panic of foreign capital still in China, further aggravate the flight of foreign capital, and form a vicious circle ... The plunge in asset prices will cause losses to many asset holders (such as banks, enterprises, individuals, etc.). ) and eventually insolvent. It originated in the financial market and eventually evolved from a financial crisis to an economic crisis.

According to the data of 5438+ 10 in June this year, China's foreign exchange reserves decreased by 700 billion US dollars last year. This large-scale capital outflow not only complicates China's economic transformation, but also increases the risks faced by other emerging markets, which have already experienced capital outflows.

Compared with China, the impact of Russian capital outflow is more serious. Russia is another big country with large-scale capital outflow recently. In 20 14 and 20 15 years, the scale of Russian capital outflow was $330 billion. Compared with the Russian economy, the scale of capital outflow is quite high, which has a far-reaching impact, leading to a sharp drop in the ruble, rapid economic contraction and tight liquidity.

In contrast, China has never seen a Russian situation, which shows China's economic strength (such as a solid capital account surplus), and the government still has policy tools to use. Tilton said that China does not need to completely stop the capital outflow, but only control it.

June 5438+ Eight control measures to control capital outflow in China since February last year.

1. Strengthen the supervision of overseas capital transfer, check whether there is any act of transferring foreign exchange to buy foreign exchange assets in batches, and punish relevant illegal acts.

2. Control the offshore RMB supply and increase the cost of shorting RMB.

3. Restrict enterprises from purchasing foreign exchange.

Enterprises can only purchase foreign exchange within five days before the actual payment. Prior to this, enterprises were free to decide when to buy foreign exchange.

4. Suspend some foreign exchange business of foreign banks, carry out foreign exchange arbitrage, and prevent capital outflow.

5. Freeze the overseas investment quota.

6. Delay the opening of Shenzhen-Hong Kong Stock Connect. China originally planned to open Shenzhen-Hong Kong Stock Connect last year, but due to the sharp drop in the mainland stock market, the Shenzhen-Hong Kong Stock Connect plan was repeatedly postponed.

7. Combat illegal use of UnionPay debit cards.

8. crack down on underground banks.