China May Loosen Overseas Direct Investment Rules

In a significant step toward liberalising capital account transactions, China is studying allowing direct investments overseas by residents in the eastern Chinese city of Wenzhou, reports Reuters.


Citing central bank head Zhou Xiaochuan, Reuters says China is encouraging capital outflows which would help reduce imbalances caused by net capital inflows.


"There may be further deregulation to allow Chinese enterprises and residents more convenience in (making) overseas investment," Zhou said during the 2012 Boao Forum for Asia on China's southern Hainan island.


Zhou also announced that the government is working on putting in place legal lenders so private businesses may have access to loans at official rates.


Wenzhou is known throughout China as a hub for "grey market" lending. Prviate entrepreneurs, who were unable to repay high interest under-the-counter loans, had to go into hiding or committed suicide, according to Reuters.