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May 24, 2005
China's foreign exchange regulator has allowed Chinese companies to buy more foreign exchange as they invest in overseas markets.
A three pronged approach is being taken to pushing the country's "Go out" policy that aims to encourage the international expansion of Chinese firms.
The State Administration of Foreign Exchange (SAFE) said on Monday it has raised the quota of foreign exchange purchases allowed by Chinese companies investing overseas to a combined US$5 billion nationwide, from US$3.3 billion previously.
The policy will also be extended from 24 provinces, autonomous regions and municipalities to the entire country.
In a third step regional bureaus are now allowed to approve purchases up to US$10 million. Previously, the bureaus could only approve purchases worth less than US$3 million.
"Through implementation of those measures, companies will find it more convenient to go through foreign exchange administration procedures for their overseas investment, and will get greater support in utilizing foreign exchange," SAFE said in a statement.
China is encouraging qualified local companies to enter international markets as a way to accelerate its integration with the rest of the world economy. To promote this regulators have been loosening control on overseas investments to give companies more freedom to make their own business decisions.
According to the Ministry of Commerce there are currently more than 6,000 non-financial Chinese businesses operating in overseas markets, half of which are profitable.
To support their operations in overseas markets, the SAFE has been gradually loosening forex controls, and by the end of last year had approved combined investment of US$5.1 billion in 1,152 overseas projects.
The increasing inflow of forex in recent years, partly boosted by growing confidence in the Chinese economy, has prompted Chinese regulators to take a more supportive stance on capital outflow.
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