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November 29, 2016

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No change in China’s outbound strategies

CHINA reiterated yesterday that it will stick to its opening-up policy and “going out” strategies, facilitating investment abroad while guarding against risks.

The nation will adhere to outbound investment management policies that allow enterprises to make its own decisions in accordance with the market situation, international practices and government guidance, according to a government statement.

The record-filing system will be the main means of managing outbound investment and authorities will verify some enterprises’ outbound investment projects in accordance with relevant regulations, the statement said.

Outbound investment has grown quickly in recent years and played an important role in deepening mutually beneficial cooperation between China and other countries as well as promoting the restructuring of the domestic economy.

The statement was jointly released by the National Development and Reform Commission, the Ministry of Commerce, the People’s Bank of China and the State Administration of Foreign Exchange.

Chinese banks’ net forex sales nearly halved in October to US$14.6 billion compared with September, as capital outflow pressure eased, according to official data.

Earlier this month, a SAFE statement said October saw less capital outflow pressure, citing such factors as reduced seasonal demand for forex purchases, increased overseas investment in the domestic bond market and a larger trade surplus.

China’s foreign trade surplus rose 17 percent month on month to US$49.1 billion in October, customs figures showed.

As China’s economy has further stabilized in recent months and its structure continues to improve, cross-border capital flows will remain stable in the medium and long term, the SAFE statement said.

The country’s manufacturing sector expanded at its fastest pace in more than two years in October, while fixed-asset investment rose 8.3 percent year on year from January to October, higher than market expectations of 8.2 percent.

Supported by the growth momentum, the Chinese currency, the yuan, appreciated against the US dollar yesterday after sinking to its weakest point since June 2008 on Friday.

The central parity rate of the Chinese yuan strengthened 126 basis points to 6.9042 against the US dollar, according to the China Foreign Exchange Trade System.

The yuan’s exchange rate will continue to be kept basically stable at a reasonable and balanced level, said Yi Gang, deputy governor of the central bank.

Accelerated economic growth in the United States, Donald Trump’s victory in the presidential election and stronger expectations of an interest rate hike by the Federal Reserve have already caused the dollar to rise in value against most other major currencies since October.

Yi noted the yuan has weakened just 3.5 percent against the dollar, much milder than other currencies such as the Japanese yen, the euro and the Swiss franc, which have weakened 10.5 percent, 5.8 percent and 4.2 percent, respectively, against the dollar since October.

Data also showed that the yuan has strengthened against other major currencies since October, he added.

“I believe capital that has flown from China will return in the future,” said Yi, citing China’s abundant foreign reserves, huge market and strong business environment.

If depreciation pressure is seen persisting, the authorities may move to strengthen supervision on capital outflow, but that does not necessarily mean a halt of outbound investment, said China International Capital Corp in a report yesterday.

Projects involving regulatory arbitrage will be examined and verified more strictly, said the report.


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