China Raises Scrutiny of Outflows Via Hong Kong Listings, Foreign Deals

China is increasing scrutiny of outbound investments by domestic companies as well as their use of proceeds from Hong Kong share sales, people familiar with the matter said, after record capital outflows put pressure on the yuan.

Authorities have recently informed China-incorporated firms seeking initial public offerings or second share sales in Hong Kong to get a “no objection” indication from the State Administration of Foreign Exchange if they want to deploy the proceeds overseas, the people said, asking not to be identified discussing private information. Firms that can’t secure such an indication have been told to repatriate their proceeds to mainland China, the people said.