China Bares Draft Guidelines on Yuan Use

China's Ministry of Commerce has released draft guidelines on foreign direct investment in China using offshore yuan, taking another step toward opening the nation's tightly controlled capital account and internationalising the local currency, reports a Dow Jones story published by the Financial News.

 

The new guidelines should make the investment approval process more transparent, if not easier, for investors, says Dow Jones.

 

According to the guidelines, foreign investors could use yuan "obtained overseas legally" to invest in China.The funds include yuan from cross-border trade settlement and offshore yuan debt and stock issues, and the yuan-denominated profits remitted overseas by foreign companies in China.

 

The funds, however, could not be invested "directly or indirectly" in domestic securities and financial derivatives, nor be used to issue entrusted loans or repay loans.

 

Investors are also required to seek approval from the ministry for yuan FDIs larger than CNY300m or investments related to certain types of financial services or industries with overcapacity, such as steel, cement and shipbuilding.

 

 

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