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Fund flow channels to widen

CHINA will allow money to leave the country through more channels instead of blocking inflows in a bid to balance capital flows, a senior official of the State Administration of Foreign Exchange said yesterday.

SAFE, an arm of the People's Bank of China, will make efforts to balance capital flows by broadening channels for outflows, said Guan Tao, deputy director of the international payments department at SAFE.

Net capital inflows rose on a monthly basis last month although they were still lower than a year earlier because of a decrease in outflows, said Guan.

"Outflows decreased after the global credit crunch was eased, so it is hard to say that hot money is back again," Guan said at a foreign exchange and gold conference yesterday.

His remarks followed market speculation of hot money inflows as new outstanding foreign exchange funds hit 242.57 billion yuan (US$35.52 billion) last month, a record high so far this year.

From August 1, companies will be allowed to lend as much as 30 percent of the value of their total equity to their overseas arms under a new rule which will ease controls on overseas lending to encourage financing for companies that plan to expand globally.

Under the new rule, companies can use their own foreign exchange assets or buy foreign exchange to finance their overseas expansion. 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 could finance their overseas facilities, and they could only use their own foreign exchange assets.

Wang Xiaoyi, vice director of SAFE, said the global economic downturn hasn't hurt China's foreign exchange market and SAFE will continue to supervise capital flows.


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