Wenzhou carries on financial reform

A plan to allow individuals in Wenzhou, Zhejiang Province to invest directly overseas has been sent to the State Council and is expected to be approved soon, the city's officials said on Thursday.

"A pilot plan to allow individuals in the city to make direct investments abroad has been jointly signed by relevant ministries and commissions and is awaiting final approval from the State Council," Zhou Xiaoping, an official at Wenzhou Bureau of Commerce, told the Global Times yesterday.

Zhou did not elaborate the details of the plan but said the plan was almost the same with the one drafted last year and approved by the provincial government.

According to the draft plan published by the city government in January 2011, local residents can invest directly overseas by setting up new non-financial firms abroad, or acquiring or buying stakes in existing non-financial firms.

Individual investors cannot exceed $3 million in any single investment project and cannot spend more than a total of $200 million each year. The limit for combined investment by multiple investors in a single project is set at $10 million, according to the plan.

Investments in overseas companies in the financial, energy or mining sectors, as well as in countries with no diplomatic relations with China are not allowed.

The plan was halted half a month after it was announced by the city government because it had not been approved by the State Administration of Foreign Exchange, which manages the country's foreign reserves, Zhou said.

"The plan, if approved, will be the first of its kind in China to allow individuals to directly invest abroad and a landmark step for the country to further liberalize its capital account," Zhou Dewen, president of the Wenzhou Council for the Promotion of Small- and Medium-sized Enterprises, told the Global Times.

"It could also prevent individuals from using underground or illegal moneylenders to obtain foreign exchange and make investments abroad, and reinforce the government's ability to manage cross-border capital flow," he said.

The Chinese currency yuan is not freely convertible under the current account and Chinese citizens are now only allowed to buy up to $50,000 worth of foreign exchange each year.

Chen Qixiang, vice secretary-general of Wenzhou Garment Chamber of Commerce, told the Global Times that the plan, if approved, could encourage individual investors to acquire foreign garment brands, reduce intermediaries in trade, and provide investment channels for the city's abundant private capital.

The private capital in the city, known for its entrepreneurs, currently totals 600 billion yuan ($94.98 billion), while the city's investments overseas accounted for just $54 million last year, official data showed.