ID :
206466
Sun, 09/11/2011 - 09:00
Auther :
Shortlink :
https://oananews.org//node/206466
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China soon to allow FDI in yuan
HONG KONG, Sept. 11 (Yonhap) -- China will soon allow foreign direct investment in yuan, the Chinese government said Sunday, a move seen to promote the use of the Chinese currency by foreign investors.
Last month, the Chinese Ministry of Commerce issued a proposal to solicit public feedback regarding FDI in China by Taiwan, Hong Kong and Macau investors using the Chinese currency.
"Unless a special event occurs, the limit (on FDI) will be lifted in September," Shen Danyang, spokesman for the Commerce Ministry, said in a statement.
The move comes after Chinese Vice Premier Li Keqiang endorsed the Chinese currency-denominated FDI during his visit to Hong Kong last month.
The ministry earlier said it would consider allowing the use of yuan raised or obtained overseas via legitimate channels, including cross-border trade settlements and offshore yuan bond and equity issuances.
According to the draft proposal, yuan-denominated FDI deals under 300 million yuan (US$47 million) can be approved at the local provincial level, and will not require ministerial level approval. In the past, yuan FDI has been allowed on a case-by-case basis.
However, ministerial level approval will still be required for investment in China's cement, steel, aluminum and shipbuilding sectors and with financial guarantees, financial leasing, and small credit and auction businesses, as well as any foreign invested company or foreign shareholding company.
The ministry also said the yuan-denominated FDI funds cannot be invested in domestic securities or financial funds derivatives. They also cannot be used to settle domestic loans inside China.
China does not have full capital account convertibility and has capital controls that limit the buying and selling of its currency at market rates. This resulted in the lack of the currency's liquidity, the most important quality necessary for a currency to gain international status.
The Chinese government, in a bid to boost the internationalization of the yuan, has been moving to develop an offshore center in Hong Kong for trading yuan products so that the yuan may be circulated freely outside of mainland China via Hong Kong.
Last month, the Chinese Ministry of Commerce issued a proposal to solicit public feedback regarding FDI in China by Taiwan, Hong Kong and Macau investors using the Chinese currency.
"Unless a special event occurs, the limit (on FDI) will be lifted in September," Shen Danyang, spokesman for the Commerce Ministry, said in a statement.
The move comes after Chinese Vice Premier Li Keqiang endorsed the Chinese currency-denominated FDI during his visit to Hong Kong last month.
The ministry earlier said it would consider allowing the use of yuan raised or obtained overseas via legitimate channels, including cross-border trade settlements and offshore yuan bond and equity issuances.
According to the draft proposal, yuan-denominated FDI deals under 300 million yuan (US$47 million) can be approved at the local provincial level, and will not require ministerial level approval. In the past, yuan FDI has been allowed on a case-by-case basis.
However, ministerial level approval will still be required for investment in China's cement, steel, aluminum and shipbuilding sectors and with financial guarantees, financial leasing, and small credit and auction businesses, as well as any foreign invested company or foreign shareholding company.
The ministry also said the yuan-denominated FDI funds cannot be invested in domestic securities or financial funds derivatives. They also cannot be used to settle domestic loans inside China.
China does not have full capital account convertibility and has capital controls that limit the buying and selling of its currency at market rates. This resulted in the lack of the currency's liquidity, the most important quality necessary for a currency to gain international status.
The Chinese government, in a bid to boost the internationalization of the yuan, has been moving to develop an offshore center in Hong Kong for trading yuan products so that the yuan may be circulated freely outside of mainland China via Hong Kong.
