On one hand China tries to embark with “One Belt, One Road” on a massive global expansion. But financial limitations on the outflow of capital go against that. Those conflicting messages makes business people worried about what road to take, says business analyst Shaun Rein to the South China Morning Post.
The South China Morning Post:
To swap yuan into foreign currency and fund outbound investment, Chinese companies need the approval of the State Administration of Foreign Exchange (SAFE).
But Beijing has adopted tougher rules on overseas investment applications since late last year, as the sharp depreciation of the yuan accelerated capital outflows, draining the country’s foreign reserves.
As of early March, Chinese companies have announced US$19 billion of acquisitions abroad, a 74 per cent drop on a year ago, according to Bloomberg data.
“The Chinese government is sending conflicting signals to businessmen,” said Shaun Rein, the managing director of China Market Research Group.
“On the one hand, it wants Chinese companies to become global players and help build the belt and road initiative, yet at the same time the government is stopping companies from converting yuan into foreign currency. The conflicting policies are hurting business confidence,” Rein said.
“China needs to decide whether it wants to lead and be part of the international economic system and fill the power gap left by a protectionist America under Trump or if it will let short-term fears of capital outflows destroy what should be a multi-decade initiative to create power and economic well being for China,” he said.
Are you looking for more experts on the “One Belt, One Road’ initiative? Do check out this list.