China Fires Back At Bernanke With Harsh New Capital Controls

china black jails

Photo: Reuters

Here’s China’s first major response to the Fed’s second round of quantitative easing — even tighter capital controls.Bloomberg:

The State Administration of Foreign Exchange will tighten management of banks’ foreign-debt quotas and introduce new rules on their currency provisioning, the regulator said in a statement on its website. The government will also regulate Chinese special-purpose vehicles overseas and tighten controls on equity investments by foreign companies in China, it said.

The regulator said that a bank’s daily net dollar positions, in expired forward contracts and spot greenback holdings, should not be less than yesterday’s levels. Forcing banks to keep hold of the U.S. currency will limit their ability to meet orders for yuan purchases.

The hope is that such measures will at least reduce the amount of potential capital inflows caused by money chasing yuan appreciation.

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