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China closely monitoring ‘irrational’ outbound investments

Updated: Dec 7,2016 7:35 AM     Xinhua

BEIJING — Chinese regulators reiterated on Dec 6 that there is no change in government policies to encourage businesses to go global, but they are closely monitoring the tendency of “irrational” overseas investment in some areas.

Real estate, hotels, film, entertainment and sports clubs are among the industries singled out for a tendency for irrational overseas investment, according to a statement jointly released by the National Development and Reform Commission, Ministry of Commerce, the People’s Bank of China and the State Administration of Foreign Exchange.

Regulators are also keeping an eye on risks associated with certain types of overseas activities, such as large non-core business investments and outbound investments in the form of limited partnership, and involved companies are advised to make their decisions “carefully,” according to the statement.

The statement was in response to news that China will tighten regulations on outbound investments to slow capital outflows.

The government will continue to support capable and qualified businesses to carry out outbound investment activities in accordance with regulations, the statement stressed.

The principle in investment management policies has not changed, it said.

Outbound investment has grown quickly in recent years and played an important role in deepening mutually beneficial cooperation between China and other countries.

But with the yuan under depreciation pressure and the economy slowing, concerns about capital outflow have been on the rise.

Due to accelerated economic growth in the United States, Donald Trump’s victory in the presidential election and stronger expectations of an interest rate hike by the Federal Reserve, the dollar has strengthened in value against most other major currencies since October.

Last month, the yuan has fallen 1.69 percent versus the dollar, but has been relatively stable against a basket of other currencies.

Latest data from the China Foreign Exchange Trade System showed the yuan appreciated slightly against a basket of currencies in November with mild fluctuations.

Chinese officials have repeatedly ruled out the possibility of sharp, sustained yuan depreciation against the dollar, citing the country’s solid economic fundamentals, current account surplus and abundant forex reserves.

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