Chinese authorities have expanded the scope and variety of
cross-border transactions that use China's currency RMB. As of
1 January 2014, it is easier for foreign investors in China to
predict if they need approval for these types of investment.
Chinese authorities have made significant efforts over the last
few years to expand the scope and variety of cross-border
transactions that use the Renminbi (RMB). The RMB currently comes
in two basic forms:
the onshore RMB (also referred to as CNY) is used in China, is
not freely tradable, and is controlled by China's central
the offshore RMB (also referred to as CNH) was introduced in
2010 to serve as an opportunity for foreign parties to use RMB, and
is freely tradable through an account outside China (mainly in Hong
Kong, but in more and more other places as well).
In 2011, Chinese authorities allowed the use of offshore RMBs
for the making of investments in China by foreign investors,
subject to the supervision of the Ministry of Commerce (MOFCOM),
the State Administration of Foreign Exchange (SAFE) and the
People's Bank of China (PBOC).
As per 1 January 2014, these authorities have disseminated new
circulars to further relax their supervisory power over the use of
offshore RMBs for investments in China. For non-Chinese investors,
the most important changes are the following:
In addition to obtaining local MOFCOM approval, investors
previously needed central MOFCOM approval for investments of more
than RMB 300 million and for investments in specific sectors. This
requirement has been removed.
Previously, only a few categories of offshore RMBs were
eligible for investment in China. Now, any legally gained offshore
RMBs may be used for investment in China, regardless of whether
obtained through cross-border trade, investment proceeds, currency
exchange, issuance of RMB shares or bonds or any other means.
MOFCOM approval is no longer required for a change of currency
(from foreign currency into offshore RMBs) used for investments in
As a result of these changes, it will be easier for foreign
investors to predict the outcome of the approval process for their
investments in China.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Developing Asia is facing considerable headwinds. Delayed recovery in major industrial economies and moderating prospects for the large economies of the China and India weigh on region's project growth forecasts.
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