Exclusive-China's Central Bank To Scrutinise Bulk Dollar Purchases

 sources  Reuters   Mon, September 11, 2023

BEIJING/SHANGHAI (Reuters) -China's central bank is tightening its scrutiny of bulk dollar purchases by domestic firms, three sources with direct knowledge of the matter said on Monday, at a time when the Chinese currency faces mounting depreciation pressure.  Companies that need to purchase $50 million or more will now need approval from the People's Bank of China (PBOC), which convened a meeting with some commercial banks over the weekend on the matter, the sources said.

"The approval process will be extended," said one of the sources.

"The recent yuan depreciation has indeed been too severe, and many now expect the yuan to weaken beyond 7.5 per dollar."

The central bank has warned some lenders of their huge dollar purchases on behalf of their corporate clients, according one of the other sources.

The directive is being issued as the Chinese yuan has declined by about 6% against the U.S. dollar so far this year, falling to levels that were last seen during the 2008 global financial crisis. [CNY/]

The PBOC had no immediate comment on plans to increase its scrutiny of dollar purchases when contacted by Reuters.

China has in recent weeks stepped up its efforts to slow the pace of yuan declines by setting persistently stronger-than-expected midpoint fixings. Earlier this month, it announced it would increase the supply of dollars by lowering the amount of foreign exchange that banks must set aside.

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