China has narrowed the available set of financial instruments for foreign banks.
China restricts the activities of foreign banks: the new rules are aimed at regulating the cash flow of competitors of Chinese banks in order to create an advantage and make international firms more dependent on local lenders.
This is reported by the New York Times.
New Chinese rules have sharply limited the ability of foreign banks to do business in the country, making them less competitive compared to local rivals. One list of rules, put into effect in December and January, limits the amount of money that foreign banks can transfer to China from abroad. The other, which came into force on Wednesday, April 1, required many foreign banks to provide less loans and sell off bonds and other investments.
According to the sources, the new rules have caused panic among the heads of global banks and foreign companies in China that depend on these lenders. Among other things, they are concerned that the rules could make foreign businesses more dependent on China’s state-owned banking system. This dependence can give Beijing another potential pressure point that it can use to pressure Washington and as an argument in a protracted trade war.
Banks and trade groups are reluctant to speak publicly for fear of initiating further regulatory measures. But in a January letter to the central bank of China, which was reviewed by The New York Times, the European Union Chamber of Commerce in China expressed concern about restrictions on money transfers.
— In some cases, the risk associated with this serious structural change may radically change the strategic direction of the development of European banks in China, ” the letter says.
The reasons behind China’s new banking rules are not clear, although they seem to be aimed at curbing large flows of money into the country from potential opponents both in the trade war and in the political arena.
— I can understand how this is related to the protection of financial stability. I can also understand why this is considered discrimination against foreign banks — ” said Mark Sobel, a former employee of the US Treasury .
The People’s Bank of China, the country’s central bank and the publisher of the rules, did not respond to requests for comment.
It is difficult to measure the flows of foreign investments into the Chinese economy, but foreign investors increased their investments in Chinese bonds by about $ 150 billion last year.
Recall that the Consul of China in Rio de Janeiro, Li Yang, addressed the Prime Minister of Canada, Justin Trudeau, in a disparaging form, “the boy who turned Canada into an errand dog for the United States.”