New Guidelines for FDI in China may mean more buoyancy for Renminbi

As reported by The Asset on Oct 19 2011, The Ministry of Commerce (MofCom) and the People’s Bank of China released new guidelines discussing procedures for how corporations wishing to execute FDI (foreign direct investments) should use Renminbi raised offshore and how banks should handle FDI-related China onshore Renminbi account management and transactional control. Some industry professionals view this as another step forward for the internationalization of Renminbi.

Though Renminbi FDI introduces greater flexibility for capital and investments offshore, onshore activities are still heavily regulated. Investment in items such as onshore stocks and derivatives (subject to QFII regulations) using the FDI channel is banned. Investment in certain industries, including some heavy industries in which the state wishes to retain its monopoly such as shipbuilding and steel, still require approval from MofCom before FDI is allowed.

Nevertheless the new measures are expected by some industry professionals to increase offshore Renminbi dynamics and introduce some fresh foreign capital onshore, especially for smaller Chinese firms. 

Report from The Asset can be assessed here.