China's Foreign Assets Top $2.9 Tril. As Controls Ease

China’s foreign financial assets rose by 23 percent last year, to $2.92 trillion, as Beijing eased controls on foreign exchange dealings.

China’s nearly $2 trillion in foreign exchange reserves accounted for 68 percent of its overseas assets by the end of last year, the State Administration of Foreign Exchange said late Tuesday in a report posted on its Web site.

It said China’s outbound foreign direct investment totaled $169.4 billion by the end of last year, while share investments totaled $251.9 billion.

Earlier this week, SAFE issued rules enabling domestic financial institutions to buy foreign exchange or use foreign currency assets and loans to invest overseas. The draft rules also allow companies to reinvest profits from their foreign investments.

Beijing controls trading in the Chinese yuan and has kept it about 6.83 to $1 for the past year, while pledging to continue loosening currency restrictions.

Meanwhile, it is encouraging companies to investment more overseas, partly to help reduce the upward pressure on China’s currency.

Managing the current system forces China’s central bank to buy up billions of dollars a month to hold the yuan steady amid an export-driven influx of foreign money.

The strategy also is expected to help to diversify the country’s foreign assets away from dollar-denominated investments.

The looser regulations are “aimed at implementing the ‘going out’ development strategy as well as for promoting and facilitating overseas direct investment,” SAFE said in a statement on its Web site.

5/20/2009 1:12 AM SHANGHAI (AP)