China will force banks to hold more foreign exchange and strengthen auditing of overseas fund raising, stepping up efforts to curb hot-money inflows that may inflate asset bubbles and add pressure for a stronger yuan.
The State Administration of Foreign Exchange will introduce new rules on currency provisioning and tighten management of banks’ foreign-debt quotas, the regulator said in a statement on its website today. The government will also regulate Chinese special-purpose vehicles overseas and tighten controls on equity investments by foreign companies in China, it said.
The measures underscore concern around the world that the U.S. Federal Reserve’s expanded monetary stimulus will cause capital to flood into emerging markets.
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