China relaxes capital controls for some foreign firms

BEIJING Mon Aug 4, 2014 6:27am EDT

BEIJING Aug 4 (Reuters) - Some foreign firms in China can now use their registered capital to buy stakes in other Chinese companies as part of an experiment to further loosen capital controls, the foreign exchange regulator said on Monday.

The State Administration of Foreign Exchange (SAFE) said the pilot test would also reduce red tape for companies that want to convert their registered capital into yuan to attract more foreign investment.

Under the new rules, companies are free to convert all of their registered capital into yuan if they so wish, though they are prohibited from using the funds to buy Chinese securities.

Previously, the amount of registered capital that firms could convert into yuan was limited by the sizes of their actual transactions. The use of the funds was also strictly controlled by authorities.

The experiment, which begins on Aug 4, will run in the special economic zones in 15 provinces and regions that include Beijing, Shenzhen and Guizhou in southern China. (Reporting By Shao Xiaoyi and Koh Gui Qing; Editing by Ron Popeski)

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