China increased the amount of foreign currency companies can buy for investment abroad by 52 percent, encouraging enterprises to expand globally and seeking to ease pressure for a revaluation of the yuan.
Companies can invest a combined US$5 billion this year, up from US$3.3 billion previously, the Beijing-based State Administration of Foreign Exchange said in rules published on its Web site Sunday. The quota may be increased if demand exceeds that amount, the statement said.
Sinopec Group (中國石化集團), CNOOC Ltd (中國海洋石油) and other Chinese companies are buying assets and businesses overseas as the government seeks resources to feed an economy that grew 9.5 percent last year.
China, the biggest user of steel, copper and cement and the second-largest energy consumer after the US, also wants companies to gain experience in the international market as the domestic economy is opened further to foreign competition.
"This is part of the government's efforts to encourage domestic companies to invest abroad to improve their competitiveness," said Yao Maogong, head trader at Shanghai Securities Co (上海證券).
Beijing-based Sinopec, the parent of Asia's biggest oil refiner, said on March 25 it got a US$5 billion loan from local banks to help fund purchases of oil and gas fields overseas.
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China's direct investment abroad rose 27 percent to US$3.62 billion last year and contracted overseas investment, an indicator of future investment plans, jumped 78 percent to US$3.71 billion, CLSA Ltd said in a report.
Increased investment overseas may also help counter the impact of dollar inflows that drove China's foreign reserves to a record US$659.1 billion at the end of March. China's government, which is resisting pressure from the US and other countries to revalue the yuan, has to buy foreign exchange to maintain the currency's decade-old peg to the US dollar.
The Bush administration is pressuring China to loosen the yuan's peg of about 8.3 to the US dollar, which some US lawmakers and companies blame for contributing to a record trade deficit and the loss of 1.1 million factory jobs in the past three years. China's trade surplus with the US totaled US$162 billion last year, according to the US government.
China is encouraging its companies to invest overseas as the domestic economy is opened to increased foreign competition after the nation joined the World Trade Organization in 2001.
The foreign-exchange regulator said companies can apply to buy foreign currencies nationwide, from 24 out of 31 provinces and major cities previously. Under the rules, effective May 19, local branches of the regulator can approve investments of as much as US$10 million, from US$3 million.
China in October 2002 allowed local regulators in 10 provinces and cities to authorize investments of as much as US$1 million, under a trial program that was expanded to 14 locations and a maximum of US$3 million in November the following year.
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