Rules relaxed for foreign investors

CHINA is to drop a number of regulatory requirements for foreign investors to make cross-border capital flow easier after this year's decline in foreign direct investment.

Starting Decmber 17, foreign investors, once they've finished necessary paperwork, will no longer be required to obtain approval for opening bank accounts, remitting profits abroad and transferring money between different domestic accounts, the State Administration of Foreign Exchange said on its website.

"The new measures are intended to make investment easier," the foreign exchange watchdog said.

Yesterday's announcement came a day after Ministry of Commerce data showed that foreign direct investment in China fell in October for the 11th time in 12 months, with inflows in the first 10 months of the year down 3.5 percent. That compares with increases of 9.7 percent in 2011 and 17.5 percent in 2010 during the same period.

The central bank said recently that China's banking system bought a net 21.6 billion yuan worth (US$3.4 billion) of foreign exchange in October, down sharply from a net purchase of 130.7 billion yuan in September, indicating weaker capital inflow despite the yuan's recent appreciation.

Economists said new foreign investment rules may help to encourage long-term capital inflows to China, but foreign investors would remain cautious in the short-term.

"The measures are consistent with China's pledges to loosen its grip on foreign exchange," said Zhou Hao, an economist with Australia & New Zealand Banking Group. "But foreign investment is not usually driven by policies and will still depend mainly on economic situations."

In a separate statement, the foreign exchange administration said the pressure of speculative money inflow remained low even though investors were becoming more optimistic about China's economic outlook.

The spot price of the yuan against the US dollar rose to a record 6.2262 on November 13.

"Market worries about capital outflow and depreciation of the yuan have ebbed on massive stimulus policies by developed countries, accelerating exports and signs of recovery in China's economy," the statement said. "Major developed economies' abundant liquidity and low interest rates will trigger capital inflows to China ... but the effects are not obvious."

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