Mon, May 16, 2005 - Page 10 News List

China to open up further to foreign investment

EASING RESTRICTIONS A Chinese journal reported that Beijing is ready to raise the cap on the amount that foreign institutions can invest in the nation's stocks and bonds

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China plans to raise the amount of money overseas institutions may invest in the nation's stocks and bonds to US$10 billion, after the initial US$4 billion quota was used up, the China Securities Journal said, citing a senior official with the banking regulator.

Foreign investors will also be allowed to invest in asset-backed bonds once they are available in the market, the report said, citing Li Fu'an, a deputy director at the China Banking Regulatory Commission. The quota increase proposed by the State Administration of Foreign Exchange and the China Securities Regulatory Commission is subject to review by the State Council, China's cabinet, said the Journal, which is a publication of the official Xinhua News Agency.

Morgan Stanley, Goldman Sachs Group Inc and Deutsche Bank are among the investors admitted to China's qualified foreign institutional investor, or QFII, program. Under the program, approved investors with at least US$10 billion in assets and US$50 million to spend may buy local currency Class A shares, convertible bonds and mutual funds. Class A shares trade on the Shanghai and Shenzhen stock exchanges.

Separately, China is limiting the amount of funds that affiliates of foreign companies can borrow from local banks to prevent speculative money from flowing into the country ahead of a possible yuan revaluation, the Nihon Keizai newspaper said yesterday.

Such loans, guaranteed by the affiliates' overseas parents, have been capped at double the amount of the local unit's capital, according to the report, which didn't say who provided the information. The measure is intended to limit borrowing that would take advantage of a possible yuan revaluation, the newspaper said.

The move may have an adverse impact on fundraising by Japanese-affiliated companies, the Nikkei said.

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