Overseas: China mulls allowing individuals to invest more

Qualified individuals would be able to spend on industry, property, financial products

SHANGHAI: China is considering relaxing limits to allow individuals to invest overseas in stocks and property, which would potentially unleash a flood of money if the government loosens strict capital controls, said the central bank.

The country keeps a tight grip on outflows of funds due to worries capital flight could disrupt the economy and weaken its control.

The People’s Bank of China said it was studying letting ‘qualified’ individuals invest abroad in industry, property and financial products through the Shanghai Free Trade Zone.

“These policy initiatives are another important step toward complete capital account liberalisation,” said Commerzbank Singapore Senior Economist.

China’s premier free trade zone in the commercial hub Shanghai was set up in 2013 with the promise of a range of financial reforms, but foreign investors especially have expressed disappointment over the pace of change.

Chinese citizens are currently only allowed to convert the equivalent of $50,000 from the domestic Yuan currency under an annual quota, which creates a limit on overseas investment though many evade the barrier.

The central bank announcement, which gave no timetable for the move, followed a top-level Communist Party meeting which discussed the country’s development plans for the next five years.

China also wants the Yuan to join the International Monetary Fund’s “special drawing rights” basket of currencies and is pursuing reforms to help gain the coveted status.

Published in The Express Tribune, November 1^st, 2015.

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