To kick off 2017, China’s State Administration of Foreign Exchange (SAFE) imposed a new round of restrictions on Chinese individuals and companies wanting to transfer money abroad.
While there have always been ways and means of circumventing the regulations in the past, the latest layer of controls on Chinese currency transactions and the use of banks to police the policies, may stem the flow from China in the short term as middle class Chinese investors find it all a bit too hard.
With the currency exchanges for the purpose of overseas property investment expressly disallowed by the Regulators, the challenge will be for Australian developers to come up with local funding solutions to offer potential investors. Easier said than done in the current banking climate, but something will be needed to bridge the gap until the next round of workarounds appear or China relaxes the stronghold on its cash reserves.
Strict new government scrutiny on Chinese people who want to convert their money into other currencies threatens to slow the rush of foreign property buying that has stoked sky-high home prices around the world. Under the new regime, the number of buyers will “drop sharply,” said Andy Xie, a China economist formerly with Morgan Stanley. Those selling homes to Chinese buyers should brace for their “business to shrink dramatically,” he warned. People in China, who can normally only convert $50,000 (U.S.) per year in foreign currency, have long been technically barred from buying property overseas, but those rules had not been rigorously enforced. For the middle class, who have become an important force in property markets in places like Canada, the United States and Australia, “it will have a big impact,” said Mr. Xie.