SHANGHAI Nov 23 A Chinese province is pushing ahead a closely-watched financial reform pilot project aimed at formalising private lending to reduce financial risks, official media reported on Friday.
Under a proposal made by Zhejiang province, the city of Wenzhou will draw up details of a trial that will allow individuals to make direct overseas investments in yuan, the China Securities Journal reported.
Wenzhou, a wealthy coastal city known for private entrepreneurs, was caught in an informal loan market debacle following a string of bankruptcies last year.
The trial for direct overseas investment, which has already been approved by the State Council, signals a significant step by Beijing to liberalise the country's capital account transactions.
Until now, Chinese citizens have only been allowed to invest abroad to set up businesses or to buy securities through asset- investment programmes.
Wenzhou will also work to attract banks and other financial institutions, such as securities firms and funds, to establish branches there to help local businesses get financing through formal channels.
In addition, authorities will also start a pilot project to develop debt investment products, such as private bond placements and bank bills, to allow Wenzhou residents to experiment with new forms of private lending.
Wenzhou has long been a centre of small factories run by private entrepreneurs, as well as home for grey-market lenders who finance them.
Last year's bankruptcies - which spawned suicides and disappearances by entrepreneurs unable to repay loans - prompted the launch of a financial reform project that aims to bring underground financing out of the shadows.
(Reporting by Fayen Wong and Chen Yixin; Editing by Richard Borsuk)