Chinese businesses and citizens will be allowed to invest in overseas financial markets through domestic banks as the government seeks to further ease pressure on the renminbi yuan, the China Securities newspaper said Tuesday.

 

The move is part of government efforts to expand channels for capital outflow and to prepare the yuan for free conversion in capital projects, an official with the State Administration of Foreign Exchange (SAFE) said.

 

With a trade surplus of US$100 billion in 2005 and a foreign exchange reserve of US$818.9 billion by the end of last year, China is under pressure for its currency to appreciate.

 

He Fan, a researcher with the Chinese Academy of Social Sciences said easing the control on capital exit has been a solution sought by SAFE ever since the inception of the pressure on the yuan.

 

He recalled that the deregulation of capital outflow could result in some of the capital returning in the form of hot money.

 

To prevent this from happening, Zou Lin, head of the SAFE's Capital Projects Department, said they will come up with new measures that will tighten control of offshore accounts.

 

(Xinhua News Agency February 27, 2006)