China to Simplify Investment Rules
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China’s currency regulator has announced it will loosen rules and reduce red tape for foreign direct investment, the latest step in efforts to buoy slowing inflows.
China’s State Administration for Foreign Exchange announced yesterday that it would ease the complex review procedures related to capital flows and currency quotas of foreign enterprises.
China’s currency regulator has announced it will loosen rules and reduce red tape for foreign direct investment, the latest step in efforts to buoy slowing inflows.
China’s State Administration for Foreign Exchange announced yesterday that it would ease the complex review procedures related to capital flows and currency quotas of foreign enterprises.
From December 17, investors will not require approval for opening foreign currency accounts or for re-investing foreign exchange reserves and will only need to register their information with relevant departments.
As part of the easing, foreign firms in China will also be able to make loans to their overseas parent companies.
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According to an official from SAFE, a total of 35 approval procedures will be cancelled with an additional 14 to be simplified.
SAFE said the rule changes were possible because China had achieved currency convertibility in the direct investment account, meaning strict restrictions in most cross-border funds payments and remittances were no longer needed.
Guo Tianyong, a finance professor at the Central University of Finance and Economics in Beijing, told the state-run China Daily:
[quote] We are making some progress in further opening up the capital account. Maybe it can’t be called a ‘big leap’ but it shows that the government is determined to make the financial system more free and open, although it faces capital inflow challenges. [/quote]
Foreign direct investment in China fell for the 11th time in 12 months in October – the longest run of year-on-year declines in inflows since 2009 – as labour costs grew and was affected also by the territorial spat with Japan that has weighed heavily on bilateral trade.
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The Commerce Ministry said on Tuesday that China drew $91.7 billion in foreign direct investment between January and October, down 3.45 percent on the same period a year ago, marking the 10th month that aggregate year-to-date flows fell compared with the previous period.
“We can see that there are still many uncertain factors weighing on the global economy and the most severe aspect is the weak world demand,” Commerce Ministry spokesman Shen Danyang told a news conference.
Despite the slowing rate of inflow, China remains on course to secure more than $100 billion of FDI for the third successive year, according to data from the United Nations Conference on Trade and Development, which collates FDI statistics globally.
