China allows firms to keep foreign earnings

China has scrapped a rule that required local companies to convert a portion of their foreign earnings into Chinese currency, the government said today, in a move that could ease pressure on Beijing's foreign exchange system.

Companies will now be allowed to decide on their own how to use money earned abroad, the State Administration of Foreign Exchange said on its website.

Previous rules requiring companies to convert at least 20% of foreign earnings into Chinese yuan boosted demand for the currency, increasing pressure for it to rise against the US dollar and other foreign currencies.

Until 2002, Chinese companies were required to bring home all the money they made abroad and obtain government permission to make new foreign investments. Beginning 2002, companies were allowed to keep 20% of foreign revenue, which was raised to 50% in 2004 and 80% the following year.