China offers fresh support for outbound investment

BEIJING (Reuters) - China will simplify currency rules and step up credit support for firms investing overseas, the cabinet said on Wednesday.

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It was the government’s latest move to encourage use of excess factory capacity at home and help local firms grow globally.

The government will allow firms investing abroad to exchange money directly at banks without first registering with the authorities.

It will also help firms to “go out” to expand abroad with more bank support for major equipment makers, the cabinet said, calling for “diversified use of foreign exchange reserves”.

Increased outbound investment helps China to export surplus capacity and makes Chinese products, especially equipment products, more competitive internationally, the cabinet said.

The government has been encouraging firms to invest abroad to help slow down the rapid build-up of foreign exchange reserves and help local firms become more competitive internationally.

The government will simplify its approval procedure for banks to set up branches overseas, and for firms to list shares abroad and pursue mergers and acquisitions, it said.

The geographical limit on issuing yuan-denominated bonds by domestic firms and banks in overseas markets will be abolished.

In September, the Ministry of Commerce simplified rules to make it easier for domestic companies to invest overseas.

China’s outbound investment by non-financial firms hit $89.8 billion in the first 11 months of 2014, up l1.9 percent from a year earlier. China drew $106.2 billion in foreign direct investment (FDI) in the first 11 months.

At the meeting, the cabinet also pledged to “revitalise” fiscal funds to support the slowing economy. It aimed to channel some leftover money into public facilities and infrastructure projects, the cabinet said.

But it pledged to crack down on “special fiscal accounts” that local governments have used to contain off-budget funds that are out of the central government’s reach.

Reporting by Kevin Yao; Editing by Jeremy Gaunt/Ruth Pitchford