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Policy Changes to Back Outbound Investment
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China will unveil financial policies changes to support overseas investment of domestic companies, Zhou Xiaochuan, governor of the People's Bank of China (PBoC), said Saturday.

The central bank will scrap unnecessary controls on foreign exchange reserves to fund local firms' outbound investment, Zhou told a forum at the 11th China International Investment and Trade Fair opened in Xiamen, a coastal city in southeastern Fujian Province.

"We will remove unnecessary restrictions on reviewing sources of foreign exchange funds, as well as on foreign currency purchase and profit remittance," he said.

"We will also allow domestic firms to use their own foreign exchanges or buy foreign funds with local currency yuan to invest abroad."

The governor noted the central bank will explore ways to buy shares in foreign banks so as to provide more convenient financial services for the overseas operations of domestic businesses.

"We encourage them to raise capital through various means including bank loans, stock listings and bond sales," he said, adding their domestic operations can provide warrants for the fund raising once they get official go-ahead.

Zhou acknowledged that the PBoC has long been taking vigorous efforts to cultivate and develop the foreign currency markets during the past few years.

He added: "we will crank up efforts to develop more products on the foreign currency markets to help companies evade risks brought about by the changes in market exchanges rates and interest rates."

"The central bank will also strengthen research on the business and legal environments in global regions where it enjoys bilateral tech cooperation agreements or funds with the regional bank institutions."

China sees negative interest rates as the consumer inflation climbs mainly due to food price hikes, prompting more people to transfer their bank deposits to the red-hot stock markets for higher earnings.

China's one-year benchmark deposit rate reached 3.60 percent after a 0.27 percentage points rise starting from Aug. 22, the fourth rise this year.

But the consumer price index, the main gauge of inflation, may exceed the ten-year high of 5.6 percent in July, said Bi Jingquan, vice head of the National Development and Reform Commission.

(Xinhua News Agency September 9, 2007)

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