Easier yuan rules for foreign firms
Print Edition
CHINA will loosen capital controls for foreign-funded firms, allowing them to convert all foreign-currency capital into yuan to help them hedge currency risks and cut costs, the foreign exchange regulator said yesterday.
Foreign firms in China will be allowed to convert up to 100 percent of their registered foreign-currency capital into yuan based on their business needs, according to the State Administration of Foreign Exchange’s new regulations.
The regulator will adjust the capital conversion ratio based on the country’s balance of payments situation, it said without elaborating. The change is effective from June 1.
The latest step, an expansion of experiments in some areas, will “give firms the autonomy in settling their foreign exchange capital and help firms hedge currency risks and reduce costs,” SAFE said.
Foreign firms will be barred from “directly or indirectly” investing such yuan funds in stocks, making entrusted loans or repaying loans to other firms, SAFE said.
But it added that some foreign firms will be allowed to buy stakes in domestic firms by converting their foreign exchange capital into yuan.
China has allowed some foreign companies to use their registered capital to buy stakes in Chinese companies as part of an experiment to further loosen capital controls.
Previously, the amount of registered capital that firms could convert into yuan was limited by the size of their actual transactions. The use of the funds was also strictly controlled.
China, which aims to boost the yuan’s global clout, has been easing its capital controls to make the yuan free.
Officials have not given a timetable for the yuan to be free but the central bank has outlined it to be “basically” convertible by 2015.
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