In an effort to ease capital controls on foreign companies, China will now allow multinational firms to move foreign exchange capital freely among their subsidiaries in that country, the State Administration of Foreign Exchange (SAFE) announced.

The relaxation in foreign-exchange controls, effective today, makes it easier for foreign companies to invest and expand within China.

Subsidiaries of multinationals in China are now allowed to lend to other units within the country or overseas, under the rules issued Thursday by SAFE, on its Website at www.safe.gov.cn. Multinational firms will be allowed to make such transactions through banks, but SAFE will set limits on the amount of funds to be transferred to help control risks.

"The move will provide solutions for multinationals seeking to improve efficiency when using foreign exchanges, reducing financial costs, improving the foreign investment environment and driving the outward-bound strategy of Chinese multinationals," the agency said.

By Alan Field