Trial eyed for individuals to engage in overseas investment
China is considering a pilot trial to allow qualified individuals to invest overseas in the Shanghai free trade zone, a step closer to scrapping the cap on currency swaps.
A State Council executive meeting presided over by Premier Li Keqiang on Wednesday decided to study and initiate the trial in the zone to allow qualified domestic individuals to make overseas investments, according to a release issued after the meeting.
Mei Xingbao, an external supervisor for the Bank of China, said the announcement was long-awaited and could be seen as a step forward in the internationalization of the yuan.
However, the trial would be conducted on a small scale and have a limited impact, Mei said.
“It will be open to residents living or working in the free trade zone, so it could benefit only a handful of people. But if fully implemented, it will have significant importance in the loosening of capital controls in China,” Mei added.
The release did not give further details of the requirements for individual investors, but reports in the Shanghai-based Securities Times have said qualified domestic investors should own net assets of more than 1 million yuan ($157,000) and must pass a test on their financial risk-preparedness.
Mei said the scale of the trial is below market expectations, as other places that applied to join in, such as Zhongguancun, a high-tech development zone in Beijing, and Wenzhou, a city in Zhejiang province known for its booming private businesses, were not included.
“The central government is being prudent in carrying out reforms like this. There are risks of money laundering,” he said.
The China (Shanghai) Pilot Free Trade Zone was set up in 2013 to