Government to encourage Chinese companies to invest yuan overseas
In a key step in expanding the currency role in the global economy, the central bank are allowing Chinese companies to invest overseas in yuan. the new rules are published in the People’s Bank of China website and domestic firms are allowed to use yuan to launch new businesses internationally.
The yuan can be also used for mergers and international acquisitions. The pilot program will be limited but the enthusiasm of Chinese investors and foreign targets for its currency should not be underestimated. Companies will then find it more convenient to invest overseas. Capital importers will be happy to receive yuan and this move will help boost the yuan pool overseas.
The trade settlement in yuan have grown dramatically, and nearly 5 percent of Chinese trade is settling mostly in yuan and the yuan abroad especially in Hong Kong. In the times that China imported goods amounting to US$1.4 trillion last year, their outbound direct investment have totaled only US$ 42 billion. If this postive steps will grow it can be considered as an improvement in the yuan global status.