China says to expand outbound investment in 2008

BEIJING, Dec 24 (Reuters) - China will let more companies and financial institutions invest overseas next year as part of a move to ease its worsening international payment imbalance, a senior official was quoted by state papers as saying on Monday.

Under the Qualified Domestic Institutional Investor scheme, or QDII, designed to help ease upward pressure on the yuan by prompting capital outflows, China has offered $20 billion in investment quotas for four brokers and a $42.2 billion quota to banks, mutual funds and insurers to make portfolio investments abroad.

Chinese companies engaging in various industries are also encouraged to explore the global market.

"The conditions creating the international payment imbalance will persist in 2008," Wei Benhua, vice head of the State Administration of Foreign Exchange (SAFE), the currency regulator, was quoted by China Securities Journal as saying.

So SAFE would further deepen its foreign exchange market, improve the yuan's exchange rate regime and expand outbound investment by industrial firms, financial institutions and individuals in a orderly manner, Wei added.

The QDII scheme allows brokers and mutual funds to invest customers' funds in stocks and a range of fixed-income products in 33 countries that have agreements with China's securities regulator.

Now banks can buy stocks in Hong Kong and Britain and more destinations such as New York, Frankfurt and Singapore will soon be opened to them.

Turning to the management China's $1.455 trillion foreign reserves, Wei repeated that safety and liquidity come before profits although more attention would be paid to yields.

He also called for equal treatment to sovereign wealth funds of developing and rich countries.

China Investment Corp, Beijing's sovereign wealth fund last week announced a $5 billion investment in Wall Street investment bank Morgan Stanley (MS.N). (Reporting by Eadie Chen; Editing by Lucy Hornby, Valerie Lee)