BEIJING/SHANGHAI (Reuters) – China’s central bank is stepping up its investigation into wholesale dollar purchases by domestic companies, three sources with direct knowledge of the matter said on Monday, as China’s currency came under pressure from a sharp devaluation.
Companies that need to buy $50 million or more need approval from the People’s Bank of China (PBOC), the sources said, adding that a meeting has been called with some commercial banks over the weekend.
“The approval process will be extended,” said one of the sources.
“The recent depreciation of the yuan has been severe, and many now expect the yuan to weaken to more than 7.5 per dollar.”
The central bank has warned about high-dollar purchases by some lenders on behalf of corporate clients, one of the other sources said.
The guidance comes as the Chinese yuan has depreciated 6 percent against the U.S. dollar so far, falling from levels last seen during the 2008 global financial crisis. [CNY/]
The PBOC had no immediate comment on plans to increase scrutiny of dollar purchases when contacted by Reuters.
China has stepped up its efforts to slow the yuan’s pace in recent weeks, with more than expected midpoint adjustments. At the beginning of this month, he announced that he will increase the supply of dollars by reducing the amount of foreign currency that banks have to allocate.
Sources told Reuters last month that China’s currency regulators had asked some banks to reduce or postpone purchases of US dollars in order to slow the yuan’s devaluation.
Meanwhile, state banks have been seen selling dollars both onshore and offshore and improving the yuan’s liquidity in the onshore foreign exchange market at the expense of China’s currency shortage.
On Monday, China’s foreign exchange regulator said it would resolutely guard against the risk of overshooting the yuan, pledging to take action when necessary to correct unilateral and cyclical movements, the PBOC said in a statement.
(Reporting by Beijing and Shanghai newsrooms; Editing by Christian Schmollinger and Christina Fincher)
