China is closing a scheme that allowed wealthy citizens access to investments outside the country, the Financial Times reports.
The country has put a Shanghai-based program called the Qualified Domestic Limited Partnership on hold, according to the report.
The partnership was supposed to allow certain foreign investment funds to sell products to wealthy Chinese citizens.
The list of participants included asset managers like BlackRock and Aberdeen Asset Management.
This is a pretty big reversal. Back in April officials told Reuters they were ready to expand the program, and were getting ready to launch a second round.
However, China has acknowledged that its economy is slowing faster than it expected, and that it will need to focus on making sure too much capital doesn’t leave the country as it tries to spur growth again.
On Monday it announced that it would cut bank reserve requirement ratios by 0.5% to inject 685 billion yuan into the economy, and that 1.8 million coal and steelworkers would be laid off.
Since it doesn’t want to see any social unrest, it will be spending $15.7 billion to transition these workers.
What China is really trying to combat with these measures are its most pressing problems — debt and overcapacity. The economy will continue to slow, there will be downward pressure on the yuan, and citizens will want to move money out — foreign investments are one way to do that.
This whole clean-up operation is going to be pretty painful and expensive. To Chinese investors the message is clear — we need your money here because things are about to get weird.