China Frees up Overseas Lending for Domestic Enterprises, Targets Core Technologies Abroad

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The Chinese central government hopes to facilitate overseas expansion by domestic enterprises by freeing up offshore lending.

The People’s Bank of China (PBOC) and State Administration of Foreign Exchange (SAFE) announced on 5 January that they had raised the macro-prudential coefficient for “domestic enterprise offshore lending” to 0.5 from 0.3.

Analysts say the move will be of benefit to satisfying the financing needs of Chinese companies seeking to expand abroad, as well as driving cross-border usage of the renminbi and encouraging greater use of the currency outside of China.

“A series of policies have been unveiled recently with the hope of driving more enterprises to expand abroad and diversify,” said Li Qilin (李奇霖), chief economist with Hongta Securities to state-owned media.

“At present many core technologies and high-end sectors are distributed abroad…expanding domestic enterprise overseas lending is of benefit to expediting the diversified allocation of enterprises, and achieving industry transformation and upgrade.

“Additionally, the stability of the central bank’s foreign exchange also clearly indicates that there are policy intentions for enterprises to engage in more overseas allocations.”

Another source from the compliance department of a foreign-invested bank said that the adjustment will drive Chinese enterprises to invest more abroad, as domestic enterprises “will be able to better make ‘blood transfusions’ to their overseas subsidiaries.”

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