China should gradually remove its currency controls to let citizens diversify their investments internationally to hedge against a slowing domestic economy that threatens to erode investments and the country’s massive savings, Naoyuki Yoshino, dean and CEO of the Asian Development Bank Institute has urged.
The nation’s foreign exchange regulator, the State Administration of Foreign Exchanges (SAFE), has imposed draconian capital controls in recent years to keep money onshore to prevent a sharp decline in the yuan’s exchange rate. Every Chinese citizen is only allowed to exchange up to US$50,000 in foreign currency a year at their bank, and also faces major hurdles to buying foreign exchange within that quota.