SHANGHAI (Reuters) – China will no longer require local firms which go public abroad to get approval to remit foreign exchange raised in listings back home, seen as a small step towards relaxing capital flows.
With immediate effect, overseas listed firms need only register their initial public offerings (IPO) or other fund-raising activities with the foreign exchange authorities and can then freely send back the funds they have raised, the State Administration of Foreign Exchange (SAFE) said in new rules published on Wednesday.
Companies had to previously submit formal applications and win regulatory approval to send back the funds, as it was part of Beijing’s efforts to control cross-border flows as the yuan is not convertible under the capital account.
The clampdown on speculative hot money flows into China had been a particularly uphill task because of many years of non-stop yuan appreciation since the Chinese currency’s landmark revaluation in 2005.
But market conditions have changed this year, with the yuan weakening along with the dollar’s strength in global markets and lingering weakness of emerging market currencies.
The yuan closed at 6.2040 on Wednesday, winding up 2014 with its first meaningful annual loss of 2.5 percent since the revaluation. It had dipped fractionally in 2009.
The new rules published on Wednesday also include amendments that make it much easier for overseas listed companies to send back surpluses of foreign exchange previously remitted overseas for acquisition, share buybacks and other activities.
In a more significant move to permit freer flow of foreign exchange, SAFE in new rules published on Tuesday relaxed restrictions on banks’ yuan trading, replacing daily caps on banks’ foreign exchange positions with weekly limits, giving banks’ leeway to short dollars.
(Reporting by Lu Jianxin and Pete Sweeney; Editing by Jacqueline Wong)