China indicated it would further crack down on capital moving out of the country, escalating an ongoing fight on foreign investment.
HNA in Deutsche Bank, Anbang buying luxury hotels and even a Chinese-led consortium to buy Italian football club AC Milan – Chinese investors have been on a foreign buying binge in recent years.
Now, China's regulator said it will crack down on a commonly-used method to obtain credit for the splurges, according to a report in «Finance Asia» which cites a Chinese regulator's official Weibo.
No More «Nei Bao Wai Dai»
Specifically, China's forex regulator SAFE, the State Administrator of Foreign Exchange, said it would severely limit what is referred to among bankers as «Nei Bao Wai Dai,» or an attest of collateral onshore in order to secure a loan offshore, such as Hong Kong.
«Finance Asia» said the regulator would look at whether domestic firms have plumped up the value of assets used as collateral, but isn't targeting any specific firms.
Hungry Acquisitors
The move will have major consequences in Europe and the U.S., where Chinese investors have been prolific and hungry acquisitors.
China's crackdown is likely to be meant as a signal that any foreign acquisitions which don't jibe with the country's outbound investment rules will be rejected.
The collateral move had been one method wealthy Chinese investors and conglomerates have gotten around increasingly restrictive capital movements out of the country.
