China has introduced a pilot scheme that allows mainland companies to use RMB to make direct investments overseas. No limit has been set on the overall amount of investments. Firms can also send profits from their RMB offshore investments back to China in the same currency.
While the move is being hailed as a significant step in the globalization of the RMB, there is little incentive to use the Chinese currency for investment for as long as it is forecasted to continue to appreciate against the US dollar, reports Tax-News.com.
“The launch of the pilot scheme for the settlement of overseas direct investments in RMB will further enhance the circulation of RMB funds for trade and investment activities. This will be conducive to the development of Hong Kong's offshore RMB market, particularly in supporting real economic activities conducted in RMB and thereby playing an active role in the greater use of RMB outside the Mainland,” comments Norman Chan, chief executive of the Hong Kong Monetary Authority (HKMA).
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