China is finalising plans to let individuals invest directly in overseas financial assets, further loosening capital controls as it seeks official reserve currency status for the renminbi.
The currency, once so tightly controlled that overseas visitors were restricted to parallel bank notes, is today freely convertible for trade purposes but strictly curbed on cross-border investment. That too is changing via a series of programmes to encourage freer capital flows, even as recent data indicate the country is grappling with record capital outflows.
Easing controls on outbound financial investment will help the renminbi meet International Monetary Fund requirements that any official reserve currency be “freely usable”, analysts say. The IMF will decide this year whether to endorse the renminbi.