China Forex Rules Eased For Business

Chinese firms that want to invest overseas no longer face quota restrictions on the amount of currency they can exchange, a small step towards greater currency liberalization, regulators said June 8. The policy, which takes effect July 1, aims to cope with the demand of domestic investors who want to invest overseas, the State Administration of Foreign Exchange said. It does away with a previous quota of $5 billion.

The administration has gradually relaxed its strict controls on exchanging yuan into foreign currency in part to push foreign enterprises to expand abroad. "Domestic investors with needs for foreign exchange for their overseas investments will be able to fully meet their needs," it said.

The move is also clearly meant to ease some of the massive hot money flows that has exacerbated overzealous investment in many industrial sectors and also sent China's foreign reserves soaring.

China's foreign exchange reserves overtook Japan's in March when they hit $ 875.1 billion, according to the most recent data.

Copyright Agence France-Presse, 2006

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