China cracks down on foreign currency transfers for property deals
Comment of the Day

November 02 2018

Commentary by Eoin Treacy

China cracks down on foreign currency transfers for property deals

This article by Michael Smith for The Australian Financial Review may be of interest to subscribers. Here is a section:

The decision to publish the cases, which involved millions of dollars in fines, is seen as a warning that the government is less willing to tolerate what is considered a grey area in the country's capital control rules. Liu Xuezhi, an economist at China's Bank of Communications, said this showed Beijing's crackdown on offshore commercial deals was being extended to individual investors.

"The government regulation on foreign currency is becoming more thorough. They are extending supervision from corporates to individuals," he told The Australian Financial Review.

"The tight control on foreign capital will be maintained for the next one or two years. This would bring an impact to the Chinese investors who are planning to buy properties overseas, including Australia."

Zong Liang, a senior researcher with the Bank of China, said he expected the move to more closely monitor transactions would stay in place for the next five years and weaken the appetite for Chinese investors in Australian property.

Eoin Treacy's view

China needs to control capital flight if it is to have any hope of navigating a future of lower leverage, higher defaults and modest growth. Chinese people have been most active in getting money out of the country by buying property which is a significant outlay and is coming under increasing scrutiny with potentially worrying repercussions for international property markets.

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