(Yicai) Nov. 4 -- China will ease its strategic investment rules for foreign investors in listed domestic firms to encourage more medium and long-term overseas capital inflow.

The new policy will allow foreign nationals to make strategic investments in listed Chinese firms instead of just legal entities, as the current rules stipulate, according to a policy document recently issued by six Chinese authorities, including the commerce ministry. The new measures will come into force on Dec. 2.

Strategic investment refers to a foreign investor directly acquiring and holding shares in a listed company for the medium to long term.

The policy will also relax asset requirements. Investors need to have at least USD50 million in actual offshore assets instead of USD100 million or no less than USD300 million instead of USD500 million in assets under management. However, if a foreign investor gains a controlling stake, the original asset requirement will be unchanged.

The new policy also adds tender offers as a new channel for foreign investment in addition to the currently available routes of private placement and negotiated transfers. Besides, it allows investors to pay by using their equity in non-listed companies abroad in contrast with the existing policy which only accepts cash or listed equity.

Even the minimum shareholding ratio and lock-up period will be lowered. The first strategic investment of a foreign investor needs to result in a minimum shareholding of 5 percent of the company's equity instead of the earlier requirement of more than 10 percent. The lock-up period is reduced to one year from the current three years.

The current policy has been effective since 2005. Foreign investors have made strategic investments in more than 600 listed companies since then, according to official data.

Editors: Tang Shihua, Emmi Laine