Is Safe Safe Now? – Foreign Exchange Regulatory Control Over Chinese Outbound and Inbound Investments and a Political Economy Analysis of Policies

Abstract

Renminbi or Yuan, the Chinese currency, has been a highest profile and longestrunning subject of controversy between China and its trade partners, especially the United States and European Union. The latest Chinese regulatory reform features a strategy of shifting from one biased against outflows towards one managing two-way cross-border capital flows in a more balanced fashion. This article will review SAFE’s foreign exchange control measures imposed on the capital transactions, i.e., Chinese companies’ outbound investment in foreign jurisditions and Chinese companies and residents’ inbound investment back to China. These regulatory measures will be reviewed from a political economy perspective.

Keywords: Foreign Exchange Regulator Reform, Outbound and Inbound Investments, Political Economy Analysis