China Allows Foreign Direct Investments In RMB

Foreign companies that hold RMB deposits outside of China can now use those offshore RMB amounts for foreign direct investments ("FDIs") into China. This new development follows the trend of the gradual internationalisation of the RMB. It will also further promote the development of the offshore RMB bond and financing markets, especially in Hong Kong.

Use of offshore RMB in FDI transactions

The internationalisation of the RMB can result in foreign companies holding surplus offshore RMB deposits. Although foreign direct investment in RMB was not entirely prohibited previously, it required reviews and approvals from MOFCOM and PBOC (both at the central government level), which was generally considered lengthy and unpredictable. The Chinese government has recently implemented new regulations to improve this process.