Capital controls cause delays in OBOR projects
April 10, 2017 Category Foreign investment, Weekly
China’s strict capital controls are delaying the approval process for companies to finance projects under the government’s “One Belt, One Road” initiative, according to industry players. “Mainland private companies now need at least three to six months to get approval from Beijing for them to get the money out of the country to finance many of the One Belt, One Road projects,” said Clement Chan, Managing Director of accounting firm BDO. “China has not banned such investment but the authorities have demanded more documentation and explanation as to how the money would be used, particularly for large amounts, above USD5 million.” He said that before the government toughened its rules on capital flight, it could take just two months to get the green light to finance a simple project. “Beijing does not want companies using these types of investment as an excuse to bring money out of the country to hedge against the loss in the valuation of the yuan. This has naturally delayed the approval process and is likely to continue this year until China reviews its capital control policies.” The yuan’s 7% deterioration last year against the U.S. dollar spurred many companies to go on a shopping spree overseas to park their currency offshore as a hedge. Initiated by Beijing in 2013, the Belt and Road plan is aimed at building railways, ports, airports, roads and other infrastructure in 60 countries neighboring China and in other parts of Asia, the Middle East and Europe to boost trade flow and economic growth.
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