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Tuesday, August 14, 2007
China eases controls, lets firms keep money made abroad (2:08 p.m.)
BEIJING -- China has scrapped rules requiring domestic companies to convert a portion of foreign earnings into Chinese currency, the government said Tuesday, in a move that could ease pressure on Beijing's foreign exchange system.
Chinese companies will now be allowed to decide on their own how to use money earned abroad, the State Administration of Foreign Exchange said.
Previous rules requiring companies to convert at least 20 percent of their foreign earnings into Chinese yuan boosted demand for the currency and increased pressure for it to rise against the US dollar and other currencies.
The latest change could help slow the growth of the US$1.3 trillion in foreign reserves China's central bank has accumulated trying to curb pressure for prices to rise by draining money from the economy through bond sales.
The forced repatriation of foreign earnings by Chinese companies increased the flood of money pouring into the economy from export revenues and foreign investment.
Until 2002, Chinese companies were required to bring home all the money they made abroad and obtain government permission to make new foreign investments. Beginning in 2002, companies were allowed to keep 20 percent of foreign revenues. That was raised to 50 percent in 2004 and 80 percent the following year. (AP) |
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