China will abandon quotas on how much foreign currency its companies can obtain in order to invest abroad, a news report said yesterday.
Such a step, which comes as Beijing's trading partners urge it to ease strict currency controls, could result in a dramatic increase in the amount of money that Chinese companies are investing abroad.
The report by the official Xinhua News Agency didn't say when it would take effect.
"In the future, if any firms win approval to invest overseas, they could freely buy foreign currencies needed for the investment from banks," Xinhua quoted Guan Tao (
Until now, China has required companies to go through a multi-stage process to invest abroad: first getting approval for projects and then applying for permission to buy the foreign currency to pay for them.
Companies are required to bring home most of the money that they make abroad and convert it into Chinese currency. That requirement gives foreign exchange regulators a dominant role in foreign business decisions.
Many companies say those restrictions limit their ability to pursue opportunities, and some flout the rules by keeping profits abroad.
The government announced last week that it would sharply raise the amount of money that companies and individuals are allowed to move abroad for investment as of May 1.
China has the world's biggest foreign currency reserves -- US$875.1 billion as of the end of March -- as a result of surging exports and foreign investment and controls that limit the amount of money that can be taken abroad.
China also is under pressure to relax controls on the exchange rate of its currency, the yuan, which the US and other trading partners say is too low and gives Chinese exporters an unfair price advantage.
"We now want to strengthen the support for overseas investment by Chinese companies," Guan was quoted as saying.
"We want to expand channels for foreign currencies to flow out of the country, which is why we are poised to abolish the corporate overseas investment quotas," Guan said.
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