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BEIJING : China has loosened foreign exchange curbs on firms wanting to invest abroad, with up to 30 billion dollars expected to flow out, state media has reported.
All Chinese firms can use their own foreign exchange funds or buy from the state reserve to finance operations at their overseas arms from August 1, the State Administration of Foreign Exchange (SAFE) said in a statement.
In the past, only large multinational companies were allowed to use their forex to lend to overseas ventures, according to the statement, which was posted on SAFE's website Tuesday.
"We had done a stress test, and the maximum possible capital outflow from this new mechanism will be 30 billion dollars," said Sun Lujun, a SAFE official, according to Wednesday's China Daily.
The move was aimed at helping Chinese companies expand overseas as it has become increasingly hard for them to raise fund abroad due to the global international crisis, SAFE said in a separate statement on its website.
However, the amount that can be lent is capped at 30 percent of the parent's net assets and should not exceed the subsidiary's total investment registered with SAFE, according to the new rules.
The easing of controls on forex outflow "will not cause (a) major impact on China's balance of payments" because the amount of cash unleashed is limited compared with the China's foreign exchange reserves, SAFE said.
China holds the world's largest forex reserves, which stood at 1.95 trillion dollars at the end of March, official data showed.
By the end of 2008, the country had 2.9 trillion dollars in foreign financial assets including both official forex reserves and private holdings, according to the China Daily.
Overseas investment has picked up in recent years, nearly doubling to 52.2 billion dollars last year from 26.5 billion dollars in 2007, it added.
- AFP /ls
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