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Wednesday, November 30, 2022

China makes it easier for firms to borrow from overseas as yuan drops

China makes it easier for firms to borrow from overseas as yuan drops
© Reuters. FILE PHOTO: Paramilitary police officers stand guard in front of the headquarters of the People’s Bank of China, the central bank (PBOC), in Beijing, China September 30, 2022. REUTERS/Tingshu Wang

 

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SHANGHAI (Reuters) – China’s central bank and foreign exchange regulator on Tuesday raised the cross-border macro prudential adjustment ratio for corporates and financial institutions, making it easier for domestic firms to raise funds from overseas markets.

The People’s Bank of China (PBOC) said in a statement it raised a parameter on cross-border corporate financing under its macro-prudential assessments to 1.25 from 1.

Tuesday’s move will “increase the sources of cross-border funds for enterprises and financial institutions, and guide them to optimise the asset-liability structure,” the PBOC said in the statement posted on its website.

The move, which reverses a previous adjustment in 2021 to tighten overseas financing, comes at a time the Chinese yuan faces renewed depreciation pressure. Allowing more capital inflows could alleviate such downside pressure.

The yuan has lost 13% against a buoyant dollar so far and looks set for the biggest annual drop since 1994, when China unified market and official rates.

Source: Investing.com

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