Tuesday, May 24, 2005
China eases cap on investment abroad
Bid to check upward pressure on yuan
BEIJING BRUSSELS: China on Sunday reinforced its efforts to relieve upward pressure on its currency by sending back some of the money that has been coming into the country as a bet on a revaluation.
The nation's foreign exchange regulator extended and expanded what had been a pilot scheme under which Chinese companies were allowed to invest abroad, partly offsetting foreigners' investments in China.
Chinese companies would together be allowed to invest up to $5 billion a year outside of China, the State Administration of Foreign Exchange said in a statement on its web site (www.safe.gov.cn). It had previously allowed only an annual $3.3 billion in such investment.
Even when the $5 billion limit was reached, companies might still get permission to send more money abroad, the administration said.
"Supporting companies going abroad is the country's long-term strategy, which needs cooperation from all sides," it said, detailing the new policy.
The U.S. and other countries are pushing for a revaluation of the yuan, which many economists expect to affect financial markets across the world, from currencies and commodities to shares and bonds.
The expansion announced on Sunday gave the administration's provincial offices the authority to approve projects each worth up to $10 million, compared with $3 million previously. The scheme now covered the whole country, not just some provinces, the administration said. If companies did not have the foreign exchange to invest overseas, they could borrow it from Chinese or foreign banks, it added.
Shipping capital abroad has not been China's only method of easing upward pressure on its exchange rate. It has also begun to let Chinese companies keep their foreign profits outside of China.
Another change was to let Chinese tourists take more cash overseas, in the hope that they would spend it. — Reuters
'Many Asian currencies undervalued'
AFP reports:
BEIJINGBRUSSELS: The European Central Bank President, Jean-Claude Trichet, said on Monday that several Asian currencies, and the Chinese yuan in particular, are undervalued compared to the euro and the dollar.
"This is the case of the Chinese currency but not only the Chinese currency, but as I said, of a number of emerging Asian currencies," Mr. Trichet told European Parliament. "There is a problem and that problem has to be solved, that is absolutely clear," he added.
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