Fuji Credit Asset Management has warned Asian clients that there is a distinct possibility that the People’s Bank of China may impose capital controls to stem the flow of money fleeing China. In light of the uncertainty over the Chinese authorities’ intentions towards the long term value of the renminbi and high volatility on the country’s stock exchanges, investors – foreign and domestic – are taking few chances and are selling their renminbi to buy foreign currencies like the US dollar and the Japanese yen in the hope they can preserve the value of their wealth.

“This kind of capital flight makes it necessary for the central bank to prop up the value of the renminbi by selling dollars or yen to buy its own currency.,” said Fuji Credit Asset Management Head of Corporate Trading, Tony Williams.

“On the surface of things, that might not appear to represent a problem since China has the world’s largest foreign currency reserves north of $3 trillion but the ruling Communist Party will not be keen on deploying those reserves in support the currency into perpetuity,” he added.

Capital flight is being exacerbated by the relative lack of investments that pay a positive return in China but the ongoing government clampdown on corruption has spurred many to liquidate assets for onward transmission elsewhere away from the prying eyes of the state.

Fuji Credit Asset Management suggests that, while capital controls preventing capital sums over a certain amount leaving the country may not be a viable or enforceable long term solution to the problem, it may be the best course of action until such time as the central bank can more clearly define its intentions with regard to the valuation of the renminbi on the global currency markets.

About Fuji Credit Asset Management:
Fuji Credit Asset Management is a fully independent, investment management practice that provides prudent, well-researched guidance and counsel to individuals, families and institutions with a need to accumulate and preserve wealth.

Fuji Credit Asset Management is a fee-only practice. This means that they are compensated solely by our clients and they neither accept nor solicit inducements or remuneration from product providers or financial institutions in return for endorsing or recommending particular investments or financial products.

Contact Fuji Credit Asset Management:
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Osaka, Japan
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