Overseas assets will get cheaper while costs at home rise Further appreciation of the yuan as the central government relaxes restrictions on capital accounts will encourage mainland companies to invest abroad, according to a group of private entrepreneurs. 'The situation will change significantly over the next 10 years as more and more mainland companies seek to invest overseas, driven by the appreciation of yuan and encouraged by the government's policy,' said Ren Xiaojian, director and CEO of the CREAT group. Mr Ren said the yuan's appreciation meant both lower costs for acquiring assets overseas and rising production costs at home. The yuan briefly strengthened below 8 to the dollar on Monday, trading at a low of 7.9972 in inter-day trade, the first time the currency crossed that threshold since last July, when authorities revalued the yuan by 2.1 per cent and abandoned a dollar peg for a managed float. It closed at 8.0030 on Monday and weakened further yesterday, when the central bank set its mid-point at 8.0150 to the dollar. The movements raised hope the central bank would allow faster appreciation in the near future. Many mainland newspapers yesterday headlined the news, which was hailed in editorials and commentaries. 'It justifies the Chinese monetary authorities' growing concern over excessive liquidity,' according to the China Daily. Mr Ren said: 'The more the yuan appreciates, the more domestic companies will 'go out' and invest overseas.' The extent of this investment would depend on the extent of the appreciation. Liu Yonghao, chairman of the New Hope Group, said his companies were preparing for the yuan's further appreciation in the near future by considering measures to cut costs, such as expanding production or moving overseas in search of cheap labour. His company has already invested in more than 20 production and manufacturing bases in Southeast Asia. 'We have been preparing for that and have already worked out plans to deal with the future situation if the yuan appreciates further,' said Mr Liu, one of the mainland's richest men and a member of the Chinese People's Political Consultative Conference. Ding Liguo, chairman of Singapore-listed Delong Holding, said his company had benefited greatly from the yuan's appreciation as a result of the rising value of its home assets and reduced cost of its overseas borrowings. 'From this point of view, companies going out will benefit from the yuan's appreciation,' Mr Ding said, adding that he expected more domestic companies to seek overseas listings or mergers and acquisitions. 'Companies with advanced technology or high-end market products also need to go abroad to build up their brands, develop new customers and upgrade technology to improve global competitiveness,' Mr Ding said. The Ministry of Commerce forecasts outward investment will grow by at least 22 per cent annually for the next five years, with the cumulative total to exceed US$60 billion by 2010.