PBoC starts trial for RMB direct investment overseas

The People’s Bank of China has allowed Chinese enterprises to use the RMB in direct overseas investment on a trial basis. This has effectively provided another channel for the supply of RMB in offshore markets, and will encourage the subsequent use of trade-derived RMB offshore funds for investment use outside China.

The PBoC's first announcement of the New Year unsurprisingly revolved around internationalization of renminbi. Chinese enterprises eligible to make overseas direct investment can now use renminbi in direct investment overseas, according to the announcement. But as a trial program, only non-financial enterprises registered in regions approved under the renminbi cross-border trade settlement scheme are eligible.

This trial programme will likely be small in scale at the early stages, and will likely accelerate the development of two important trends that have increasingly caught the eyes of the investment world in recent months. One is the internationalization of the renminbi, the other is the steepening pace of overseas direct investment.