China Eases Rules to Boost Yuan-Denominated Foreign Investment

December 17, 2013

China’s commerce ministry has simplified rules to make it easier for foreign firms to use Chinese renminbi they raise offshore to invest in the mainland, the latest effort to broaden the currency’s footprint.

The simplification to rules published in 2010 and 2011 has scrapped extra approval procedures previously needed specifically for investment projects denominated in yuan, otherwise known as the renminbi, the ministry said in a statement on Monday on its website, www.mofcom.gov.cn .

Currently, all foreign direct investment (FDI) deals in China must seek the ministry’s approval on a case-by-case basis. In addition, investment transactions denominated in yuan have to go through extra examinations, but as of Jan. 1 these additional approvals will no longer be required, the ministry said.

The extra checks had included a requirement that foreign firms specify the sources of their yuan funding, while projects with a value of 300 million yuan ($49.41 million) or above must file a record with the ministry.

Foreign firms will remain barred from using yuan funds to trade domestic securities, financial derivatives or making entrusted loans.

As part of Beijing’s strategy to internationalize the yuan, the government is trying to create channels for overseas yuan holders, particularly those in Hong Kong, to invest in the mainland’s markets and industries.

(Reporting by Aileen Wang; Editing by Simon Cameron-Moore)

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