China’s foreign investment ‘shopping spree’ over as Beijing moves to slash capital outflow by Maggie Zhang in South China Morning Post.Nov 29, 2016

The central government is embarking on a massive policy shift designed to stem capital outflow by curbing mainland China’s outbound investment, sources informed of official instructions have told the South China Morning Post.
Tighter control of outbound investment is likely to put an end to a trophy asset shopping spree by well-connected companies such as Anbang Insurance and Dalian Wanda, with Beijing ready to cut the supply of foreign exchange for such deals.
Shanghai’s municipal foreign exchange authority had told bank managers in the city that all overseas payments under the capital account bigger than US$5 million would have to be submitted to Beijing for special clearance before proceeding, the sources said.
While the move did not necessarily mean all such deals would be vetoed, the regulatory procedures that would have to be navigated before completing them would take much longer, the sources said.
A separate document seen by the Post, said to be the minutes of a central bank meeting on cross-border capital controls, said that from now until September next year Beijing would ban deals involving investment of more than US$10 billion, mergers and acquisitions valued at more than US$1 billion outside a Chinese investor’s core business, and foreign real estate deals by state-owned enterprises involving more than US$1 billion.
The central bank did not reply to faxed questions about the document and the central government has not made any public statements about a policy change.
But it has been sending more obscure signals. On Monday morning, a two-line statement signed by the four ministerial bodies supervising mainland China’s overseas investment was published by the official Xinhua news agency and also posted on the central government’s portal website. The National Development and Reform Commission, the Ministry of Commerce, the People’s Bank of China and the State Administration of Foreign Exchange said the mainland would not change its regulatory framework for outbound investment, but the central government would “check and verify outbound investment projects by some companies according to relevant laws and regulations”.
Analysts said that as the mainland’s yuan currency continued to weaken against the US dollar and its foreign exchange reserves shrank further, the authorities were expected to become increasingly hostile to overseas deals by mainland companies and to impose more regulatory scrutiny and foreign exchange checks on mainland investors.
Eric Liu, a partner at law firm Linklaters in Beijing, said he was not surprised the authorities were closing doors for outbound investment focused on asset diversification due to growing capital outflow pressure.
“It’s already visible that tighter scrutiny would make it more difficult for capital to sneak around current measures and thus slow down outbound investment in the short term,” Liu said.
Mainland China’s foreign exchange reserves have fallen by US$873 billion since hitting an all-time high of US$3.99 trillion in June 2014. The reserves fell by US$46 billion last month, the largest monthly fall since January, but that understates the size of mainland China’s capital flight because residents are also moving yuan assets abroad.
Jeffrey Sun, a partner with US-based law firm Orrick, Herrington & Sutcliffe in Shanghai, said some companies had front-loaded outbound deals in the expectation of tighter capital controls.
“China could fine-tune its policy in the future if it sees temporary curbs being overly tight,” he said. “Some deals would be delayed or even stifled amid tighter capital control.”
Market jitters were exacerbated over the weekend by speculation that Beijing was poised to ban six types of outbound investment in order to slow capital outflow amid market expectations of further yuan weakness. http://www.scmp.com/news/china/economy/article/2050029/chinas-foreign-investment-shopping-spree-over-beijing-moves-slash