China’s central bank has ordered at least two foreign banks to suspend some cross-border yuan business until late March, Bloomberg News reported, citing sources.
The People’s Bank of China (PBoC) on Tuesday imposed a three-month ban on settling offshore clients’ yuan transactions in the onshore market, the sources were quoted as saying.
The clampdown comes as the growing offshore-onshore spread makes it profitable for those who skirt capital controls to buy the currency at a discount in Hong Kong and sell it in Shanghai, the report noted.
It is not clear how widely the ban has been applied among foreign banks or which institutions are suspended, it said.
The gap between the yuan’s onshore and offshore exchange rates has widened since August when China’s currency devaluation fueled expectations among overseas investors for further renminbi weakness.
By closing loopholes in its regulations, Beijing is trying to stabilize the currency which has been hit by capital outflows.
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