China launches trial to allow overseas yuan investment

January 13, 2011 | 19:03

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China on Thursday launched a trial allowing Chinese firms to use yuan to invest abroad, a move seen as another step towards making the unit a global currency.

Chinese companies now can use the yuan to finance new ventures, mergers and stake purchases overseas, the central bank said in rules governing the programme posted on its website.

The programme will "further expand the use of the yuan in cross-border trade and investment and better support (Chinese) companies to go abroad," the People's Bank of China said.

Under the rules, only non-financial firms registered in regions that are on the list of an existing yuan cross-border trade settlement trial are allowed to participate in the investment programme.

Despite the global success of Chinese exporters, the yuan plays only a minor international role due to restrictions on exchanging it for other currencies. Official controls make it difficult to move the yuan in and out of China.

China is stepping up efforts to increase overseas use of the yuan as the nation seeks to reduce its exposure to the US dollar and allow its currency to take on a greater worldwide role.

In the past two years, China has signed currency swap arrangements with several nations and launched trials for yuan trade settlement with a number of mainly Southeast Asian countries.

In December, Beijing increased the number of firms allowed to use the yuan to settle international trade to 67,359 from 365, moving closer to its pledge to eventually expand the trial programme to the entire country.

AFP

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