SHANGHAI/HONGKONG (Reuters) - China’s foreign exchange regulator has ordered banks in some of the country’s major import and export centers to limit purchases of U.S. dollars this month, three people with direct knowledge said on Friday, in the latest attempt to stem capital outflows.
The move comes as China reported its biggest annual drop in foreign exchange reserves on record in 2015, while the central bank has allowed a sharp slide in the yuan currency to multi-year lows, raising fears of more capital flight and panicking global markets.
The price spread between the onshore and offshore markets for the yuan, or renminbi, has been growing since China’s surprise devaluation last August, spurring Beijing to adopt a range of measures to curb outflows of capital.
All banks in certain trading hubs, including Shenzhen, received the regulator’s order recently, the people added. They declined to be identified because they are not allowed to speak to the media.
“It will have some impact, because it is a form of control, but at the moment the limit doesn’t seem very restrictive so unless they extend the period of the limit, it’s unlikely to change volumes over the whole year,” said a senior banker in the foreign exchange department of a foreign bank.
“It’s just to stop panic buying this month,” the banker added.
The total amount of U.S. dollars sold to clients in January for a bank in one of these hubs cannot exceed the amount sold in December, according to the people.
“They have asked us to limit our purchase amount and there are targets, but it mainly relates to institutions and enterprises, there is no change to the policy on individuals,” said one person.
Officials at State Administration of Foreign Exchange did not immediately respond to comment.
China suspended forex business for some foreign banks, including Deutsche, DBS and Standard Chartered at the end of last year.
Reporting by Shanghai and Hong Kong newsrooms; Writing by Engen Tham; Editing by Kazunori Takada & Kim Coghill