SAFE: 4 Types of Outbound Investment Being Scrutinized

SAFE is cracking down on what it determines to be bad, abnormal or dubious investments:
Reuters: China checking outbound investment deals amid forex crackdown
Authorities will target new companies that have invested overseas but are not believed to have real businesses, and firms deemed unable to sustain overseas operations, an official at the State Administration of Foreign Exchange (SAFE) told Xinhua.

They will also check overseas investment projects unrelated to parent companies' main business operations, and firms suspected of obtaining yuan funding via "abnormal sources" and illegally moving assets overseas, the SAFE official said.

Authorities will guarantee "real and reasonable demand" for foreign exchange for investing overseas while cracking down on fake investment activities, the official said.
More interesting is what SAFE told Xinhua. As part of its message that reserves and outflows are stable, it said there hasn't been a surge in companies or individuals seeking foreign exchange.
In this regard, the State Administration of Foreign Exchange on the 8th accepted an exclusive interview with Xinhua News Agency, said there is no surge in businesses and individuals purchase of foreign exchange.
While there's no doubt some capital flight taking place, a lot of outflows are pent up investment/diversification demand. Think about real estate: the Chinese government has no problem with massive investment in the sector because it produces domestic GDP. Any company pouring cash into Chinese real estate can look overseas though, and see relative bargains (plus geographic, economic and currency diversification) all over the globe. The demand for overseas investment is very high and has little to do with currency expectations.

The general public and most companies haven't yet jumped on the depreciation train. The outflows to this point are the new normal, not a panic or shift in fundamental expectations. China burned through nearly $1 trillion in reserves, will the public and most companies also stay pat when the next trillion is burned off, and USDCNY is heading for 8?

iFeng: 外管局:目前存在四类境外投资异常行为

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