Move comes ahead of Hu's maiden visit to the U.S.
Qualified banks to pool capital in Renminbi for overseas investmentsInsurance institutions to buy foreign currencies for investment
BEIJING: As Chinese President Hu Jintao prepares to embark on a visit to the U.S., China has further relaxed controls on foreign exchange accounts, simplifying approval procedures for foreign exchange payments in the service trade, and procedures for individuals to buy foreign currencies.
The People's Bank of China, the central bank of the Communist nation, will allow qualified banks to pool capital in Renminbi, the Chinese currency, from domestic institutions and individuals for overseas investment in products with fixed returns under an unspecified quota system. It will allow fund management firms and other securities institutions to invest in a combination of stocks and other overseas securities using foreign currencies gathered from domestic institutions and private sources, the central bank said late on Thursday.
The bank said it would allow qualified insurance institutions to buy foreign currencies for investment in overseas products with fixed returns and money market instruments.
The amount of foreign currency purchased would be under a "certain portion'' of the total assets of the insurance institution. The bank said the new policies would be implemented in cooperation with other departments, while closely monitoring international payments, and readjusting policies to prevent risks and safeguard the country's economic and financial security.
The latest Chinese move on forex came amid preparations for Chinese President Hu Jintao's maiden visit to the U.S. where he would face questions on the country's currency exchange policies from his host, George W. Bush as well as the Congress and labour unions. With a record trade surplus of over $100 billion in 2005 and a foreign exchange reserve of $818.9 billion by the end of last year, China is under pressure for its currency to appreciate. PTI