China to ease FX rules on foreign direct investment

BEIJING Wed Nov 21, 2012 2:45am EST

BEIJING Nov 21 (Reuters) - China's currency regulator said on Wednesday it will ease some regulations and cut red tape to support foreign direct investment (FDI) in the country in the face of slowing inflows.

The move comes after data on Tuesday showed China's longest run of year-on-year declines in FDI inflows since 2009 extended into October, dragged down by an uncertain outlook for corporate spending as global trade sags.

The State Administration of Foreign Exchange (SAFE) said in a statement on its website that it would simplify procedures for foreign exchange transactions in FDI accounts and quicken approvals for investment applications.

It would also scrap the rules under which foreign investors need approval to open foreign currency accounts and to re-invest FX earnings. Foreign firms in China will also be permitted to make loans to their overseas parent companies.

SAFE said the rule changes were possible because China had basically achieved currency convertibility in the direct investment account, meaning strict restrictions in most cross-border funds payments and remittances were no longer needed.

The new regulations take effect from Dec. 17.