Beijing is accelerating a calibrated opening of its capital account next year while simultaneously beefing up mechanisms to manage cross‑border risks. In a year‑end interview with China Foreign Exchange, Xiao Sheng set out 2025 achievements and a blueprint for 2026 in which the State Administration of Foreign Exchange (SAFE) and the People’s Bank of China (PBOC) aim to marry higher‑level two‑way market access with strengthened after‑the‑fact supervision.
Over 2025, authorities concentrated on widening market access and practical facilitation. They expanded the QDII (qualified domestic institutional investor) framework, issuing roughly $3.08 billion of QDII quota to 82 institutions; supported 42 foreign issuers to place panda bonds denominated at about RMB 361.6 billion (an 87% year‑on‑year increase); and iterated cross‑border cash‑pool rules that now serve more than 1,100 multinational groups and some 19,000 affiliate companies, covering about $2.1 trillion of cross‑border flows.
Policy pilots were deployed selectively to lift frictions: measures in Xiong’an and across free‑trade zones simplified external debt registration, allowed banks to handle more foreign‑debt paperwork, and clarified rules for outbound listings. The authorities also rolled out nine cross‑border facilitation measures to ease foreign‑fund reinvestment, payment and settlement for overseas real‑estate purchases by residents, and other everyday FX frictions that constrain trade and investment.
SAFE is using targeted incentives to nudge capital toward industrial priorities. Green external debt pilots across 16 provinces have so far mobilised about $1.1 billion of green overseas financing. Support for technology and innovation firms was widened by raising the cross‑border financing convenience ceiling from $5–10 million to $10–20 million, making it easier for high‑growth enterprises to access offshore capital.
Looking to 2026, Xiao outlined a two‑pronged strategy: deepen “institutional opening” across direct investment, cross‑border debt and securities investment, and at the same time fortify a supervision framework that is consistent with a more open capital account. Practical measures include further QFII/QDII refinements, broader national rollout of the integrated domestic‑foreign currency cash‑pool policy for multinationals, simplified foreign‑exchange registration for inbound foreign direct investment, and new digital tools to streamline capital‑account services.
Crucially, risk management will not be an afterthought. SAFE intends to expand middle‑ and post‑event supervision, refine a capital‑account early‑warning indicator set, and reinforce countercyclical levers for capital‑account management. The stated goal is to prevent systemic financial shocks while allowing a steady increase in two‑way flows that support trade, “headquarters” economies and the international use of the renminbi.
For global markets the package is pragmatic rather than revolutionary: Beijing is lowering transactional barriers and enlarging channels for outbound and inbound flows, but within a household of stronger monitoring and control. That dual approach reflects a leitmotif of Chinese policy since the tightening of capital‑flow management after the 2015–16 episode: opening for economic benefit, but with layered guardrails to limit rapid, destabilising reversals.
Investors and policymakers overseas should expect a steady stream of incremental liberalisation steps accompanied by closer scrutiny. Enhanced access to China’s bond and equity markets, larger green and tech‑oriented financing windows, and expanded corporate liquidity tools all present opportunities for multinational firms and global asset managers. At the same time, the emphasis on post‑event supervision and macroprudential oversight signals that Beijing will retain the capacity to adjust the pace of opening if volatility or outflows threaten financial stability.