CHINA S eastern city of Wenzhou has postponed a pilot project to allow its residents to directly invest overseas, because it had not received approval from the foreign exchange regulator, local media reported Saturday.
The Oriental Outlook Weekly, quoting unidentified sources, said the Wenzhou Foreign Trade and Economic Council had received orders from the State Administration of Foreign Exchange (SAFE) to stop work on the project until it received approval.
Still, the paper said the project would likely receive the go-ahead from SAFE because Wenzhou s entrepreneurs have long been making overseas investments by evading capital controls, so the project would legalize an existing practice and help prevent the inflow of hot money from overseas.
The plan by the Wenzhou government to allow direct overseas investments by its residents was seen as a major step towards the opening of China s closed capital account and making the yuan more convertible. Any major delays to the project would be a setback to the liberalization of the yuan.
The program had so far received a cool reception from Wenzhou residents because of stringent limitations, such as barring individuals from investing in overseas companies in the financial, energy or mining sectors, the paper said.
(SD-Agencies)
