ID :
190606
Thu, 06/23/2011 - 10:16
Auther :
Shortlink :
https://oananews.org//node/190606
The shortlink copeid
China allows yuan-based foreign investments
By Kim Young-gyo
HONG KONG, June 23 (Yonhap) -- China said Thursday that it has allowed foreigners to make investments in its fast-growing economy using the Chinese currency as part of efforts to internationalize the yuan.
China, which eclipsed Japan as the world's No. 2 economy this year, has been seeking to reduce its reliance on the U.S. dollar and promote the yuan as a global currency.
The central People's Bank of China said in new guidelines that yuan-based direct investments include business acquisitions, stake purchases, investor lending and the establishment of new companies.
However, the central bank said all yuan-based investments must win its approval, a move seen as a way of controlling the influx of speculative capital into the country.
China currently does not have full capital account convertibility and has capital controls that limit the trading of its currency at market rates. Such measures have resulted in the lack of the currency's liquidity, the most important quality necessary for a currency to gain international status.
In a step toward internationalizing the Chinese currency, the central bank began trials for cross-border trade settlements with the yuan in July 2009. The trials were expanded to 20 provinces and regions by June of last year.
Meanwhile, China has signed a slew of currency swap agreements worth 841.2 billion yuan (US$130 billion) with 12 countries and regions since the onset of the global financial crisis in late 2008. China has also allowed qualified businesses and banks to settle their overseas direct investments in the yuan since January of this year.
To further boost the use of the yuan, Beijing has allowed foreign companies to issue so-called dimsum bonds, which are denominated in the yuan and issued in Hong Kong.
Market watchers say Chinese government officials are trying to avoid opening the doors to free capital markets all at once, as they fear a sudden torrent of foreign capital might cause chaos in the country's financial sector.
ygkim@yna.co.kr
HONG KONG, June 23 (Yonhap) -- China said Thursday that it has allowed foreigners to make investments in its fast-growing economy using the Chinese currency as part of efforts to internationalize the yuan.
China, which eclipsed Japan as the world's No. 2 economy this year, has been seeking to reduce its reliance on the U.S. dollar and promote the yuan as a global currency.
The central People's Bank of China said in new guidelines that yuan-based direct investments include business acquisitions, stake purchases, investor lending and the establishment of new companies.
However, the central bank said all yuan-based investments must win its approval, a move seen as a way of controlling the influx of speculative capital into the country.
China currently does not have full capital account convertibility and has capital controls that limit the trading of its currency at market rates. Such measures have resulted in the lack of the currency's liquidity, the most important quality necessary for a currency to gain international status.
In a step toward internationalizing the Chinese currency, the central bank began trials for cross-border trade settlements with the yuan in July 2009. The trials were expanded to 20 provinces and regions by June of last year.
Meanwhile, China has signed a slew of currency swap agreements worth 841.2 billion yuan (US$130 billion) with 12 countries and regions since the onset of the global financial crisis in late 2008. China has also allowed qualified businesses and banks to settle their overseas direct investments in the yuan since January of this year.
To further boost the use of the yuan, Beijing has allowed foreign companies to issue so-called dimsum bonds, which are denominated in the yuan and issued in Hong Kong.
Market watchers say Chinese government officials are trying to avoid opening the doors to free capital markets all at once, as they fear a sudden torrent of foreign capital might cause chaos in the country's financial sector.
ygkim@yna.co.kr
