China is considering allowing overseas institutions to remit funds raised in yuan on the domestic market to outbound destinations after they convert the money into foreign currencies, aiming to curb the growth of its soaring forex reserve.
Overseas institutions are restricted to investing yuan funds raised on the Chinese market in domestic projects alone, according to current regulations.
However, the State Administration of Foreign Exchange (SAFE) said in a recent report it would allow yuan funds raised by overseas institutions to go outbound in the form of foreign exchange "at an appropriate time".
The Asian Development Bank and International Finance Corporation had earlier been approved to issue yuan-denominated bonds on the Chinese market, the proceeds of which were only allowed to finance Chinese companies.
Analysts said the move indicates the Chinese government is striving for a more balanced sheet of international payments and a slow-down in the growth of foreign exchange reserve with multiple means.
China's foreign exchange reserve had reached US$1.43 trillion by the end of September, according to the country's central bank.
China's international payments recorded a combined surplus of US$253.1 billion in the first half of this year, according to the SAFE report published on Wednesday.
The SAFE report expected the country to continue maintaining a big surplus in international payments in the latter half of this year.
The administration pledged it would deepen reform in foreign exchange regulation, further lift restraints on capital outflow, strengthen the supervision of cross-border capital flow, and gradually make the yuan convertible under the capital account, to address the expanding surplus and foreign exchange reserve.
