China: capital flight or renminbi internationalization?

During 2014–2016, many analysts have claimed the occurrence of a capital flight in China due to the reduction of the country's foreign reserves by over US$800 billion. This paper aims therefore to answer the question: did China really undergo a capital flight in this period? Its methodology includes a detailed analysis of the Chinese external stocks and flows between 2014 and 2016, and an examination of the currency hierarchy and the international usage of the renminbi (RMB). The authors conclude: the fall in the foreign reserves that occurred in China in 2015–2016 was partially due to (i) a strategy of the Chinese government to diversify its international assets; and (ii) Chinese residents (private entities) increasing their foreign-asset holdings. Besides that, there did indeed occur a capital flight in China in 2015–2016, mostly due to a reduction of the non-resident deposits and loans, but these outflows were partially in RMB. Due to that core difference, the effects on the domestic economy are much lower. Furthermore, the RMB outflows may contribute to the internationalization of the RMB.

Does Punishing Sanctions Busters Work? Sanctions Enforcement and U.S. Trade with Sanctioned States

How can the government agencies responsible for enforcing economic sanctions enhance their effectiveness? This study explains how and why sanctions enforcement actions undertaken by sender governments can discourage their firms from trading with the states they sanction. Specifically, we examine how the penalties imposed against sanctions violators by the U.S. Department of Treasury’s Office of Foreign Asset Control (OFAC) affect U.S. firms’ trade with target states. We argue that because U.S. firms are responsive to the risk of being penalized and the disruptions that penalties create, U.S. trade with sanctioned states will be lower in the aftermath of OFAC enforcement actions. The penalties’ frequency and severity will magnify those negative effects. We hypothesize that OFAC enforcement actions taken against both U.S. and foreign sanctions violators will negatively impact U.S. trade with targets. Analyzing data from 2003 to 2015, we find that OFAC’s sanctions enforcement actions decrease U.S. trade with sanctioned states in numerous ways.

China’s asset management industry: mapping the global landscape

Purpose The purpose of this article is to describe the globalization process of China’s asset management industry. Design/methodology/approach This article looks at the globalization of China’s asset management industry from a bilateral perspective. On one hand, it analyzes new measures promulgated in China to expand the opening up of capital markets and attract foreign asset management institutions. On the other hand, it gives an introduction on some advisable choices for Chinese asset management companies to invest overseas. Findings With the promulgation of the Shanghai Guidebook for Overseas Asset Management Institutions among other measures that further liberate China’s financial market, 2020 marks an important era for foreign asset managers. Besides, this article suggests that Luxembourg, Ireland and the UK are ideal European destinations for Chinese asset management companies to invest in. Practical implications This article aims to keep foreign asset managers updated of new rules regarding financial market liberalization in China and help them to expand business in Shanghai. This article also gives a brief introduction on the fund industry in Ireland, Luxembourg and the UK, to give those Chinese asset management companies which are considering overseas investment some inspiration. Originality/value Practical guidance from experienced lawyers in the practice of foreign investment and capital markets.

Singapore

Singapore is a large financial center with a strong regulatory framework and significant external exposures. Singapore is a small and very open economy with a high saving rate and a significant foreign asset position. It boasts a highly developed and sophisticated financial sector, with many foreign branches intermediating funds throughout the region. Regulations are closely aligned to international standards. Since the last FSAP, bank solvency and liquidity has improved, and the authorities have adopted Basel III capital and liquidity requirements and the new International Financial Reporting Standards.