Exchange controls for Chinese companies, which played a big role in stemming outflows last year, are being tightened subtly as policymakers look to avoid a bout of capital flight such as that seen in 2015.

While relatively loose monetary policy is required to support the slowing economy, China’s central bank said in a statement on Friday, its top priority will be to ensure yuan stability and liquidity.

From anecdotal evidence, Chinese companies are having more trouble than usual moving funds from the mainland for ordinary business operations. This is viewed as a signal from the People’s Bank of China that capital flight will not be tolerated.

Tighter capital controls are needed to reconcile looser monetary policy and a stable yuan.

7-day repo

Sources have told Asia Times that Chinese authorities were surprised by the decline in both internal and external demand. Disappointing retail sales in November reflect precautionary savings. The unexpected drop of the Caixin PMI below 50 reflects a contraction in world export orders, reflected also in the earlier-reported South Korean orders, especially for semiconductors. Global CapEx plans appear to have been postponed due to uncertainty about supply chains after the Trump tariffs.

The damage to world trade arising from the Trump trade war is increasing, as David Goldman wrote on Nov. 30. Some of the impact had been masked by inventory stockpiling in advance of the US tariffs, but overall the drop in Chinese export orders has been sharp.