China may take additional steps to advance the yuan’s internationalisation and ease cross-border flows on the back of rising investment demand, according to a prominent economist.
Advertisement
“Chinese companies are showing strong momentum in expanding their overseas investments, so I believe the Chinese government will take more enabling measures [to support transactions],” said Xiang Songzuo, former chief economist at the Agricultural Bank of China.
He added that the internationalisation of the yuan is being driven more by business demand than by Beijing pursuing it “for its own sake”.
Currently, Chinese companies require government approval for overseas direct investment, as Beijing maintains strict capital controls to limit outflows – even as it encourages international use of the currency.
As domestic firms look to expand their global footprint, Xiang said he expects Beijing to gradually accelerate efforts to facilitate the flow of the yuan.
Advertisement
“As long as the investments are legitimate, [the government] will certainly support companies that want to go overseas,” Xiang said.