In recent months, Beijing has clamped down on the flight of currency from its economy while denying the imposition of new capital control norms. Last year, the yuan fell to its 7 year low against the greenback.
A top executive of China’s MSCI Inc, an index provider, has stated that China’s progress towards the full inclusion of its stocks in global benchmarks could come to a grinding halt if it were to continue to maintain strict vigil on capital controls.
In recent months, China has tightened its grip on businesses and individuals who have been trying to move their wealth out of the country. While China has denied imposing new capital controls, it has done so to cushion the fall of its currency, the yuan.
In 2016, under the reins of a struggling economy, the yuan fell 7% against the USD, its biggest fall since 1994.
Last June, a decision by New York-based MSCI to bring in onshore Chinese stocks termed as “A shares” into its MSCI Emerging Markets Index can bring in hundreds of billions of dollars from insurers, asset managers and pension funds.
“If they reverse course and they restrict the ‘out’ door, then how can we?” said Henry Fernandez, MSCI’s Chairman and CEO.
He went on to add, “It’s going to be hard for the MSCI to put the A shares into the index because we will not be doing a good service to our clients.”
Fernandez clarified that although China’s capital controls have not yet affected international investors however given its potential as a looming threat, MSCI is monitoring developments in China.
Last June, MSCI refused to add China’s A shares to its global emerging markets benchmark index for the third year in a row, saying the country had to do more to open up its market.
Fernandez said, consultations with Chinese authorities are likely to start after the Chinese New Year, later in January.
Categories: Economy & Finance, Geopolitics, Strategy
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