Curbs on overseas lending to ease for firms going global

By Zhang Fengming | June 10, 2009, Wednesday |

Print Edition

China will ease controls on overseas lending to encourage financing for companies that plan to expand globally.

Companies will be allowed to lend as much as 30 percent of the value of their total equity to their overseas arms, the State Administration of Foreign Exchange said yesterday on its Website, quoting a new rule that will come into effect on August 1.

At the same time, the overseas subsidiaries won't be able to borrow more than the amount of their investment registered with SAFE.

Companies can use their own foreign exchange assets or buy foreign exchange to finance their overseas expansion, the new rule said. Companies that have a clean record in the past three years can apply for the financing.

Previously, only a few multinational or state-owned companies can finance their overseas facilities and they can only use their own foreign exchange assets.

"The rule aims to provide follow-up funds for companies with overseas investment, amid the backdrop of the financial crisis," the foreign exchange regulator said in a statement. "The new rule can help facilitate investment trade and support qualified companies to venture globally."

The easing of overseas financing is expected to help counter the weaker external demand. China's export sector is hard hit by the global recession, with exports slumping 22.6 percent in April from a year earlier. March's decline was 17.1 percent and February's was 25.7 percent.

The drops clouded upbeat views that China's exports were on track for a recovery.

Economy

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Curbs on overseas lending to ease for firms going global

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