Interesting Facts Gleaned from China Mobile SEC Filings

I was reading the 20f form for China Mobile (NYSE:CHL) (available here) and came across the following paragraph:

Substantially all of our revenues and operating expenses are denominated in Renminbi, while a portion of our capital expenditures and indebtedness are denominated in U.S. dollars and other foreign currencies. The Renminbi is currently freely convertible under the current account, which includes dividends, trade and service-related foreign currency transactions, but not under the capital account, which includes foreign direct investment, unless the prior approval of the State Administration of Foreign Exchange is obtained.

I have previously heard about the capital controls on the Chinese economy; for instance, foreigners like me can’t trade Shanghai A Shares. As of the publication of this article (Feb ‘05–so not that recent!), Chinese insurance firms and I would assume other institutional investors were not able to invest in foreign stocks.

These facts raise two questions in my head:

• Are Chinese firms now able to invest abroad?
• How are the different regulations on “capital” and “current” account flows actually enforced? It seems it would be very difficult to look at financial transactions between two parties and determine how to categorize each transaction (without significant contextual information, which I doubt is easily available to or usable by a financial regulator).

To answer the first, less interesting, question, I found this article. That article basically (from May ‘07) discusses raising the %age of funds which insurers may invest overseas. Here is another article which discusses the (on ice) plans for individuals in China to be able to invest in the HK stock market–the so-called “through train”. I guess the takeaway is that China is not moving very quickly on allowing their firms or citizens to invest abroad. This raises the question of “why”? I think their primary goal with these capital controls is to maintain control over the Yuan’s value.

I’ll follow up on the second question later. It seems much more involved and more interesting!