SHANGHAI — To defend against accusations by Washington and others that it doesn’t play fair on trade, Beijing could point to the banks. Chinese leaders have been steadily lowering the barriers they had erected around the country’s vast financial system, giving Wall Street and European lenders a greater shot at winning business in the world’s second-largest economy.
Now the walls are going up again.
New Chinese rules have sharply limited the ability of foreign banks to do business in the country, making them less competitive against local rivals, according to three people with knowledge of the directives. One set of rules enacted in December and January restricts how much money foreign banks can transfer into China from overseas. Another, which took effect on Wednesday, required many foreign banks to make fewer loans and sell off bonds and other investments, two of the people said.
The new rules have caused a stir among the global bank executives and foreign companies in China that depend on those lenders for money, the people said. Among other concerns, they worry that the rules could make foreign-owned businesses more dependent on China’s state-run banking system for the money they need to grow. That dependence could give Beijing another potential pressure point to use as it squares off against Washington and others over trade, human rights, geopolitics and other sticky issues.
Banks and trade groups have been reluctant to speak publicly for fear of triggering further regulatory measures. But in a January letter to China’s central bank that was reviewed by The New York Times, the European Union Chamber of Commerce in China raised concerns about the money transfer limits.
encouraged boycotts of foreign businesses like H&M, the Swedish retailer, and Nike, the American athletic brand, after they vowed not to use cotton made by forced labor in Xinjiang.
The reasons behind China’s new banking rules aren’t clear, though they appear to have little to do with the tense political environment. They seem to be aimed instead at stemming big, potentially disruptive flows of money into the country.
surpassed the United States last year by taking in $163 billion worth of direct investments in factories, office buildings, companies and other assets.
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Big money flows into a country can also make its currency rise in value — and China appears to working hard to counter that.
China’s currency, the renminbi, rose sharply in value against the U.S. dollar in the second half of last year. In May, $1 was worth about 7.15 renminbi. By year’s end, $1 bought about 6.5 renminbi. That rise was bad news for China’s exporters because it made their goods less competitive overseas.