The central government has increased the amount of foreign exchange mainland companies can buy for the purpose of investing abroad, in a move aimed at promoting overseas investment. According to an announcement posted on the State Administration of Foreign Exchange's website, companies will be allowed to purchase a total of US$5 billion for overseas investment this year, up from last year's limit of US$3.3 billion. The move is also aimed at relieving upward pressure on the yuan by allowing a small portion of the country's enormous foreign exchange reserves to head offshore. China's foreign exchange reserves grew to US$659.1 billion by the end of March and pressure has been growing from its trading partners, especially the United States and Europe, for the government to revalue the yuan. However, with China's trade surplus alone expected to expand to US$100 billion by the end of the year from US$32 billion last year, the US$5 billion quota will have only minimal impact on net capital flows. 'This is part of the incremental loosening of controls on outward investment that has been going on for the last two or three years, but it is not going to relieve any of the pressure for currency reform,' said Stephen Green, a senior economist with Standard Chartered in Shanghai. Companies listed on Hong Kong and overseas stock exchanges are not bound by SAFE's limit, as they can use their overseas listed arms to invest offshore. 'If you add up all the headline deals Chinese natural resources companies are doing in South America, Africa and Greater Asia, then it adds up to a lot more than US$5 billion,' Mr Green said. 'The reality is that a lot of these deals aren't actually going ahead, while other deals are being managed outside the quota system.'