China relaxes capital controls as pressure eases on yuan

Beijing

THE recent relaxation on renminbi capital controls will add more uncertainty to the exchange rate but analysts say the currency is unlikely to see any major fluctuations.

Last Friday, several Chinese media said banks are no longer required to set aside a 20 per cent deposit on forward sales of foreign exchange, a rule imposed in 2015.

The media also reported that the central bank, in a statement sent to Chinese banks, has removed its reserve requirement for offshore renminbi deposits.

The reserve requirement for offshore renminbi deposits was aimed at discouraging short bets on the currency, by forcing offshore renminbi clearing banks to hold a portion of their offshore deposits on reserve at the People's Bank of China (PBOC), China's central bank. By raising the cost of forwards to banks and their clients, the central bank aimed to discourage thei…