Shanghai to loosen yuan investing

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Shanghai is trying to allow overseas companies to invest in the domestic market if they have already settled cross-border trades in yuan.

The city wants such overseas companies that open cross-border trading accounts at banks in Shanghai to invest in the domestic market to expand investment channels in the yuan, Fang Xinghai, head of the Shanghai Financial Service Office, said yesterday.

The equities, bonds and inter-bank credit markets are among those being studied for the investment channels.

An investment mechanism similar to the Qualified Foreign Institutional Investor program could be the best option, he said.

China set up the QFII to allow overseas companies to invest in China's yuan-backed A-share market. Companies have to apply for a quota to invest in the stock market.

"The trading companies already have the local currency, so they would only need to apply for investment quotas," Fang said.

The settlement value sat at 11.5 billion yuan (US$1.7 billion) as of May 21.

The expected move is part of Shanghai's efforts to become a global financial hub by 2020. In March 2009, the State Council issued guidelines to help the city accomplish its goal.

Shanghai is also trying to attract "the best multinational companies" to list on the coming international board at the Shanghai Stock Exchange.

New regulations on the board are being made and preparations are going smoothly, Fang said, declining to give a timetable for the board's launch.

Shanghai will create a multi-layered financial market, promote the opening of financial services and ensure financial stability in the coming years to achieve this goal.

Accelerating Shanghai's development in modern services, manufacturing, financing and shipping will be of great significance to the Yangtze River Delta and the nation, the State Council said earlier.

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