Expectations for further yuan depreciation have weakened significantly, State Administration of Foreign Exchange (SAFE) spokeswoman Wang Chunying told a news conference.
Net sales of foreign exchange by Chinese commercial banks dropped to $40.9 billion in the first quarter, compared with $124.8 billion in the first quarter of 2016 and $337.7 billion in sales previous year, SAFE data showed.
Premier Li Keqiang said Tuesday that market confidence in the yuan currency has significantly improved and the nation will keep yuan basically stable at a reasonable and balanced level.
While the relaxed policy doesn't cover cross-border foreign exchange flows or big outbound investment deals, it was the first relaxation of outbound capital control in almost two years, the sources told the Post. The economy grew at the strongest pace since mid-2015 in the first quarter.
Starting in late 2016, and enhanced further at the start of this year, the PBoC introduced measures making it harder for individuals and companies to move money out of China, particularly for what it deemed to be "irrational" investment in property, entertainment, sports and other sectors.
But the small relaxation step won't help much in terms of outbound investment approvals, said Greg Burch, who works on mid-market China outbound M&A deals as a Hong Kong-based partner at the Locke Lord law firm.
Those measures are credited with quashing speculative outflows and helping to stabilise the currency, but have also hampered legitimate outflows as China Inc goes more global.
Much will depend on the outlook for the US currency, which analysts expect to rebound eventually as the Federal Reserve continues to slowly raise interest rates.
Non-financial outbound direct investment from China tumbled 48.8 percent in the first quarter year-on-year, with dealmakers saying many Chinese firms are unable to close deals because they can not secure official permission to transfer yuan into foreign currency. "China won't return to the old path of foreign-exchange controls", she said.
Foreign central banks held $81.1 billion in yuan assets at the end of a year ago, up 13 percent, with 92.5 percent of those assets in bonds, SAFE data showed.