Select multinationals operating in China will benefit from new
measures to facilitate forex fund flows, both between subsidiaries
in the country and with parent companies overseas.
The foreign exchange (forex) administration is taking steps to
facilitate fund flows within multinationals in China and with their
parent companies abroad, according to Fang Shangpu, director of the
State Administration of Foreign Exchange (SAFE) Shanghai
Bureau.
Shanghai is taking the lead nationwide in allowing
multinationals to transfer their after-tax profits to their parent
companies abroad, he said.
This should be conducted in the form of loans and done through
banks, with later repayment stipulated.
Foreign companies with multiple subsidiaries in China will also
be able to manage their forex assets collectively in their Chinese
headquarters.
Under current regulations, they must manage their forex
individually. If one subsidiary is short of funds, it must go to a
bank or intermediary instead of turning to its headquarters or
other subsidiaries.
The new initiative allows companies to make use of their funds
around the country under the authority of a Chinese headquarters.
This will decrease their financing costs and help companies better
to use and allocate their capital.
"It will improve the credit structure and fortify the fund
efficiency of these companies," Fang said.
But the new initiative only applies to select multinationals.
The criteria include records of forex deals, financial structure
and the credit and scale of parent companies, according to
Fang.
The new policies also aim to create a better investment
environment in Shanghai, which is encouraging multinationals to
locate their regional headquarters in the city.
Moreover, SAFE's Shanghai bureau is implementing measures to
apply equivalent regulations to both foreign and Chinese
companies.
"This complies with China's commitment to the World Trade
Organization that foreign companies will be given domestic
treatment by 2006," he said.
"However, given the current situation, we are still unable to
manage the foreign currency administration on foreign and Chinese
companies in exactly the same manner."
SAFE pledges to change its decades-old policy, which is
concerned primarily with forex outflow.
"Similar status will be given to both directions of the fund
flow", Fang said.
He also said the administration of the forex loan principals of
foreign banks will be improved this year.
SAFE's Shanghai bureau will assist the city's state assets
reform, which will involve foreign capital.
Some Chinese enterprises, including state-owned ones, are also
looking at overseas companies for acquisition. Fang said his bureau
would support these deals.
(China Daily March 3, 2004)