China to Allow Foreign Investors in Finance Sector to Use Yuan

October 11, 2013

China’s central bank will allow foreign businesses to invest in domestic financial firms using offshore yuan funding, it said on Thursday, as part of efforts to broaden the usage of the currency in cross-border investments.

Foreign businesses can invest their yuan revenues in domestic financial firms in several ways, including by setting up joint ventures or mergers or by buying stakes in domestic firms, the People’s Bank of China said in a statement on its website,

Any such investments will still need to be approved by Chinese authorities, the central bank said.

Beijing has been stepping up efforts to attract offshore money back into the country by relaxing investment restrictions as capital flowing into its economy slows but outflows rise amid slowing economic growth.

Under rules issued in 2011, foreign investors could invest in domestic firms yuan profits made in China as well as yuan funds from share transfers and asset sales that have been remitted overseas, but not in the financial sector.

China’s yuan is convertible under the current account, the broadest measures of trade in services and goods. But it remains under tight restrictions on the capital account, particular on debt and portfolio investment.

(Reporting By Aileen Wang, Xiaoyi Shao and Jonathan Standing; Editing by Kim Coghill)