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China is going to try allowing larger scale of personal foreign investment outside China from certain cities -
China's large pool of private capital, reportedly in hundreds of billions of yuan, is looking for suitable investment outlets including those outside China

It is reported that a proposal for ※financial reform§ which includes relaxing control of Chinese personal foreign investment outside China is being considered by China's State Council.  If approved, a trial run of the ※financial reform§ will be conducted in different Chinese cities.  Different combinations of ※financial reform§ have recently been proposed or announced for Shanghai, Tianjin, Wenzhou, Quanzhou and Pearl River Delta (Shenzhen, Zhuhai, Guangzhou, Nansha).  

News about the proposed ※financial reform§ was released on Friday 2.12.2012.  A newly drafted implementation framework for managing Chinese personal foreign investment outside China was introduced.

Issues of personal cross-border Reminbi (RMB) transaction includes personal RMB remittance, personal foreign investment, financing of personal foreign investment, settlement of currency exchange and control of personal investment in foreign financial markets.  According to China's present foreign exchange control, Chinese personal foreign investment outside China is limited to US$50,000 per year.  The proposed ※financial reform§ includes relaxation of such control.  It may also allow the use of domestic local asset within China as collateral to raise funding in foreign currency for personal foreign investment. 

It is understood that the proposed ※financial reform§ includes allowance for a person to set up new business outside China, to participate in the ownership or to take control of an existing foreign enterprise outside China.  Under the new control, a person can invest maximum US$3M per project overseas; if people are grouped, a group can invest maximum US$10M per project overseas; each person can invest maximum US$200M overseas per year.  The new policy encourages Chinese personal foreign investment in ※production or service§ businesses abroad.  The policy does not allow ※consumption type§ investment (eg. buying real estate) or investment in financial products.

The proposed ※financial reform§ policy also includes the following goals concerning management and support of Chinese personal foreign investment:
1.Direction of services concerning foreign investment 每 to guide proactively foreign law-abiding investment; to assist understanding of foreign security (investment protection) framework, foreign legal system and business customs for Chinese personal investors; and to promote concepts of harmonious win-win investment outcome and social responsibility in foreign countries; to establish and preserve a good image of Chinese investors in the international market.
2.Provision of financial and taxation support 每 to increase support for financing Chinese personal foreign investment such as using domestic asset within China as collateral for financing Chinese personal foreign investment. China's finance and tax departments to provide financial support and tax benefit for encouraging Chinese personal foreign investment outside China.
3.Utilization of foreign based institutions for liaison support 每 to establish links between governmental and private organisations to build liaison network to support foreign investment; to guide Chinese invested or controlled foreign enterprises to strengthen self-discipline, and to integrate into foreign local community in harmony.  To develop information, consultation and agency services to provide guidance and information on foreign countries' inbound investment policy and new business trends.
4.Handling of business conflict and emergency 每 to establish policy and framework to handle potential business argument, conflict and emergency situation in foreign countries.
5.Promotion of diversification of foreign investment 每 to guide private capital to invest in a broader spectrum of businesses overseas and to participate in healthy international competition and collaboration.

Due to deceleration of China's economy in the past year, there has been decrease in investment opportunity within China.  However, accumulation of surplus capital in the private sector keeps increasing, although at a slower rate.  This large pool of capital is seeking suitable investment outlets.  It has been reported that just for Wenzhou City alone, the volume of capital accumulated in the private sector is estimated to be over RMB 600 billion (US$96 billion +) and is increasing at a rate of 14% per annum, according to figures released by the city's finance department.  Unofficial figure is reported as over RMB 800 billion (US$128 billion +) or even RMB 1000 billion (US$160 billion)

Source: HKEJ - 23.11.2012; CEN - 4.12.2012

China has announced policy earlier in July this year to encourage Chinese private enterprises to invest outside China.  Refer our other news articles
China encourages private enterprises to invest and to develop business abroad
China facilitates financing of private enterprises' foreign investment
China further encourages private enterprises to invest and to develop business abroad

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China to relax control on Chinese personal foreign investment

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