Foreign currency to be invested abroad
By Zhang Ran (China Daily)
Updated: 2006-07-25 08:48
The CSRC did allow some leading brokerages to pioneer asset management
schemes as early as October 2004. Following the release of the rule, all
qualified securities firms will be able to follow suit.
The rule, by
encouraging capital outflows, is widely believed to be able to alleviate the
yuan's pressure to appreciate.
The renminbi has gained 1.6 per cent since
the government revalued it on July 21, 2005.
And the policy to allow
qualified foreign institutional investors to invest in the domestic capital
market in 2002, the so-called QFII scheme, also increased the supply of foreign
currency, putting pressure on the yuan to rise.
To strike a balance, the
government has relaxed controls on capital outflow, allowing fund management
firms and insurers to invest abroad under the so-called qualified domestic
institutional investors, or QDII, programme.
The State Administration of
Foreign Exchange recently gave Bank of China, the Industrial and Commercial Bank
of China Ltd and Bank of East Asia Ltd quotas worth a combined US$4.8 billion to
convert yuan deposits into foreign currency for overseas investment on July
21.
"Now a new channel for foreign currency outflow will alleviate the
pressure to appreciate the yuan," said Li.
The domestic stock market
closed mostly flat yesterday despite the central bank's announcement of another
0.5 percentage point hike in bank reserve requirements on Friday.
The
benchmark Shanghai composite index closed at 1,665.944 points, up 0.04 of a per
cent, after falling as much as 2 per cent during the morning.
Turnover
in Shanghai A shares was 17.2 billion yuan (US$2.2 billion).
According to
Jiang, yesterday's draft rule also encouraged more subscriptions in the latest
initial public offerings (IPOs) as it gave no limitations on how much such asset
management plans can subscribe to in an IPO.
She emphasized that it was
another break as brokerages will now be allowed to invest in stocks of the
companies they underwrite, which was previously banned by the
regulator.
(For more biz stories, please visit Industry Updates)
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