China’s currency regulator suspended more than 1,500 companies from using trade-related foreign- exchange services following record capital outflows.
The companies were found to be “shell corporates,” which didn’t conduct any business as of the end of August, the State Admistration of Foreign Exchange said in a statement posted on its website yesterday. The authority also restricted its services, which include settlement and conversion, for about 700 companies owing to unlawful activities, it said.
“It could be part of the measures to block loopholes as capital outflows have been quite strong recently”,’’ said Zhang Zhiwei, a Hong Kong-based chief China economist at Nomura Holdings Inc. by phone today.
The nation reported a $71.4 billion capital-account deficit for the three months through June, the biggest quarterly shortfall in data going back to 1998. China started streamlining foreign-exchange controls for cross-border trade in goods at the start of last month to support exports, which rose in July at the slowest pace since January.
As the yuan has weakened 0.7 percent this year, China has been experiencing capital outflows of between $20 billion and $40 billion each month since late 2011, Nick Chamie, head of global currency strategy at Royal Bank of Canada in Toronto, estimated in an Aug. 24 report.
In April, SAFE said it had uncovered more than 15,000 cases of “illegal and irregular foreign-exchange transactions” between 2007 and 2011, resulting in fines totaling 1.27 billion yuan ($200 million). Two calls to SAFE’s press office today went unanswered.
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