In its efforts to keep money within borders, China recently imposed a nationwide capital control law that would limit one’s ability move money abroad.
According to the recent reports, the Chinese government now requires a 20% margin on all currency forwards. It means that a bank, which has sold a $100 of the currency forward, would now be required to deposit $20 at the central bank.
The said law reminds one of the recent Greek crisis, where the country had taken similar steps to control the devaluation of its national currency. Like Greece, China also needs to keep its funds at home, only to battle the economic slowdown it is experiencing within. The new — and rather strict amendment — is simply aimed at fending off the greater macro-financial risks.