PBoC Tries to Slow Yuan Bears

Bloomberg: Yuan Rule Change Set to Spur Dollar Borrowing, Offset Outflows

Chinese companies will have more flexibility in repatriating funds borrowed overseas, including deciding on timing, the State Administration of Foreign Exchange said on its website in June. The firms have responded to rising costs for servicing foreign debt by cutting dollar bond issuance 21 percent in the first half to $39.4 billion, while increasing domestic note sales 24 percent, Bloomberg-compiled data show.

...“Chinese regulators want to encourage capital inflows to counter the rising capital outflows,” said Liu Dongliang, a senior analyst at China Merchants Bank Co. in Shenzhen. “The measures may result in an increase in offshore dollar bond sales by Chinese companies, especially those which have difficulty selling bonds onshore. But the amount won’t be big enough to change the whole picture.”

WSJ: China Orders Foreign Banks to Set Aside Reserves for Forex Forward Trading

China is requiring foreign banks that conduct foreign-exchange forward trading for their clients to set aside reserves—a move that will make it more expensive to bet on the yuan’s weakness.

The China Foreign Exchange Trade System, which is run by the nation’s central bank, said in a statement Wednesday that foreign banks must set aside reserves equal to 20% of the forward-trade position.