They prevent cash outflow by ensuring your business accounts are with local Chinese banks and your transactions must pass through those banks.  A company has a quota (usually annual) for how much can be sent out of China and the banks have records of your company's quota usage.  There are deals to be made.  If you're bringing in $X million USD to invest in China, you may be able to get the government to set your quota to that of your original investment or higher.  This is negotiable to some extent.  But the overall purpose is to lock in some or all of your gains so your choices are aligned to investing in China (real estate, stock market, other China companies, etc).<p>Similar system for personal gains.  If your a foreigner working in China your supposed to be paid by the local company which means through their local bank accounts which can only pay to your local bank account (usually only to the same bank).  If I recall correct, your default quota per year is $50K USD (or is that RMB? I never hit either limit).  So if your making $200K a year in China and are not blowing all that on housing and having a grand time, your limited to only being able to send $50K a year out.  Some get around this (as well as taxes) by paying their foreign employees through an international entity and then the employee bring in the cash he needs on a regular basis.  But this practice is deteriorating as China is becoming better at policing payroll of foreigners working in China.