China Plans To Ease Capital Controls To Boost Yuan Value

Oct 10, 2014 05:52 AM EDT

(Photo : Reuters/Carlos Barria) An employee of the Industrial and Commercial Bank of China Ltd (ICBC) talks to a costumer at one of the bank's branch at the Shanghai Free Trade Zone in Pudong district, in Shanghai September 24, 2014.

China is advancing efforts to internationalize the value of its currency through overseas investments and allowing local companies to sell yuan-denominated stocks to Europe and neighboring Asian countries.

Wang Dan, deputy director at People's Bank of China (PBoC), announced Thursday that Chinese nationals will be able able to buy property equities and real estate investments through Qualified Domestic Retail Investor (QDRI). Agricultural Bank of China (ABC) is also underway to offer the same using Global Depository Receipts in London and Singapore but is yet to announce exact dates of issuance.

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Beijing is seeking partnerships with Hong Kong and Shanghai to further its use of yuan, which is now the seventh widely-used monetary scheme for global payments.

QDRI was first pitched in August 2007 but was shortly abandoned impending Chinese to buy stocks direct from Hong Kong. In January 2013, PBoC commenced preparations for a similar Qualified Domestic Individual Investor providing citizens the channel to invest abroad.

Hong Kong holds the highest record of Chinese monetary savings amounting to 937 billion yuan ($157 billion) while Singapore and London both topped their quotas on yuan investments last year. In effect, the yuan currency grew 0.14 percent in Shanghai and 0.15 percent in Hong Kong, based on a Bloomberg report last August.

ABC Executive Vice President Li Zhenjiang announced in a Beijing conference held yesterday that the bank has already commissioned security firms to work with London Stock Exchange in preparation of the depositary receipts. He furthered that capitalizing on yuan is an effective way to "connect with the markets of the advanced economies."

Nathan Chow, an economist DBS Group Holdings Ltd. in Hong Kong added that QDRI provides an alternative to investors instead of using the riskier shadow banking options. The policy is implemented to help China boost its investment capitals and dropping real estate sales caused by its market recalibration.

TagsChinese yuan investments, yuan