China will allow foreign investors to freely remit their yuan-denominated profits and dividends and pledged to remove all barriers in cross-border trade and investment. The People’s Bank of China (PBOC) said the use of renminbi for cross-border trade and investment will help create a sound business environment and support the country’s Belt and Road Initiative. “Chinese banks should ensure that foreign investors can freely remit yuan-denominated returns from profits and stock dividends,” it said. The move will encourage foreigners to use the Chinese currency for direct investments into the country.

The central bank also now permits Chinese companies to transfer funds raised from overseas bond and stock issuance back home, based on their actual needs, and promised to further simplify the necessary procedures. The PBOC move came after the Central Economic Work Conference reiterated in December 2017 to “push forward a new pattern of all-round opening up to pursue mutual benefits with the rest of the world”. Meanwhile, the China Foreign Exchange Trade System (CFETS), a unit affiliated with the PBOC, is allowing qualified foreign banks to directly participate in regional transactions in the interbank foreign exchange market. Previously, these banks could purchase yuan only through domestic agent banks. The CFETS said it will promote transactions in the interbank foreign exchange market and improve efficiency of bilateral settlement between yuan and other foreign currencies.

Li Haihong, Researcher at the International Monetary Institute of Renmin University of China, said that the moves would help promote the use of yuan in trade settlements and payments, and encourage foreign companies and other central banks to hold the Chinese currency as part of their foreign exchange reserves. “It will provide new opportunities for the internationalization of the yuan,” said Li. “It also reflects Chinese monetary authorities’ confidence to further open the capital account in the future, ” he added. The central bank will also make it easier for Chinese workers to send their overseas earnings back to the country, while allowing foreigners to freely remit their legal income earned in China back home, the China Daily reports.

Domestic companies repatriating overseas profits will be allowed more leeway to deduct taxes paid abroad from their taxable incomes. On December 28, the Chinese government also temporarily exempted foreign investors from being taxed on profits from Chinese investments provided these proceeds were reinvested in industries high on the government’s priority list. The new measure puts in place a system that encourages foreign funds to remain in the country and makes repatriation attractive for Chinese companies. Both tax breaks have been made effective retrospectively from January 1, 2017.

On the other hand, new limits have been imposed on the amount of money Chinese citizens can withdraw from their Chinese bank accounts while abroad. Individuals will be allowed to withdraw a maximum of CNY100,000 a year, regardless of how many separate bank accounts or ATM cards they have, the State Administration of Foreign Exchange (SAFE) said. The current cap on daily withdrawals remains unchanged at CNY10,000 per card.