China to relax 'red chip' rules

Investors are interested in the growth prospects of Chinese firms

Chinese firms may find it easier to list shares abroad after regulators decided to repeal laws that had sought to limit the foreign transfer of funds.

The State Administration of Foreign Exchange (Safe) will no longer require firms to get their permission before setting up subsidiaries to list abroad.

The set-up restrictions will be lifted from 1 November.

State media said the move should boost demand among Chinese firms looking to list on foreign stock exchanges.

'New life'

Before the regulations were put in place, a firm would register a shell company - called a red chip - somewhere offshore and then transfer assets to that.

Once that was done, investors were given the chance to buy shares in the red chip, and the stock was listed on a stock exchange.

Some of China's biggest companies have been listed in this way, including oil producer CNOOC and internet company Sina. However, restrictions were imposed earlier this year.

"The cancellation of the rules will give new life to the Chinese companies aiming for overseas listings through the red-chip road," Shanghai Securities News said.

Separately, the yuan strengthened after a key advisor and economist said that he expected further changes in the country's currency policy.

Earlier this year, China allowed its currency to appreciate and the market has been predicting further moves.

"Personally, I think there will be several further changes," said Yu Yongding, head of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences.

Mr Yu is a member of the monetary policy committee at the People's Bank of China, which gives advice on policy but does not set interest rates.

Future changes may include additional changes to the trading band or a new exchange rate - the rate is currently set once a day against the dollar.