Despite the central bank's recent hike in interest rates, Chinese companies will continue to enjoy low-interest loans when they invest in government-encouraged overseas projects.

The National Development and Reform Commission (NDRC) and the Export-Import Bank of China (China Exim Bank) yesterday jointly announced the decision and application procedure at the commission's website.

The bank's press official told China Daily that preferential measures are the continuation of a decision made by China Exim Bank and the commission last year.

"The policy has no change and application procedures have been adapted to China's adjusted investment regulations," said the official. She did not reveal exactly how preferential the interest rate will be.

Last Thursday, the People's Bank of China jacked up interest rates for the first time in nine years. The benchmark rate for one-year renminbi loans was lifted to 5.58 percent from 5.31 percent and the rate on one-year deposits to 2.25 percent from 1.98 percent.

According to the joint announcement, the commission, the highest governmental department to oversee China's economy, and the bank will set up a regular mechanism to help competitive Chinese companies.

The bank will spare a certain amount of annual credit to help Chinese companies explore overseas resources badly needed in China.

Other priority overseas loan projects encouraged by the government include production factories and infrastructure which can spur export and create more jobs. Priority credit for the export of equipment, technology and raw materials, which are demanded by overseas investment projects, will be provided for companies.

Lin Yueqin, a researcher with Economic Research Institute of the Chinese Academy of Social Sciences, said helping domestic companies invest in foreign countries plays an important role in maintaining a sustainable and healthy economic growth in China.

"Investment overseas has become a major way for Chinese enterprises to participate in global economic competition since China began to adopt an opening up policy more than 20 years ago," Lin said. "But it's far from enough."

Chinese companies made overseas direct investments valued at US$2.85 billion last year, an increase of 5.5 percent compared with 2002, the Ministry of Commerce said.

By the end of last year, the total amount of overseas direct investment by these companies reached US$33.2 billion, the ministry said in a Statistical Communique of China on Overseas Direct Investment, jointly issued with the National Bureau of Statistics. Direct investment by Chinese companies accounted for only 0.48 percent of the world's total.

(China Daily November 4, 2004)