China Quietly Relaxes Controls on Foreign Capital Agence France-Presse - Getty Images China's recent actions could help stem the recent weakness of the country's currency, the renminbi. HONG KONG - The Chinese government has begun making it much easier for foreign investors to put money into China's stock market and other financial investments, in a slight relaxing of more than a decade of tight capital controls. The move, not publicly announced but disclosed by some private money managers, indicates that Chinese officials are anxious to counter a rising flight of capital from the country, a worsening slump in real estate prices, a weak stock market and at least a temporary trade deficit caused by a steep bill for oil imports. Those concerns have evidently started to offset fears of the potentially inflationary effects of big inflows of foreign cash. Chinese security officials made a series of phone calls to top fund managers outside China late last week telling them of the relaxation of the capital restrictions, according to several money managers. But if the fund managers wanted to increase their requested allotments for investing in China, they were told they would have to answer almost immediately - a sign of the government's haste to come up with a plan to reassure financial markets. "It literally was phone calls coming in at 4 and you had to give an answer by 5:30," said the chairman of a large financial company that invests heavily in China. He insisted on anonymity to avoid offending regulators. Making it easier for foreign money to come into China could help offset the beginnings of an exodus of investment money from China and stem the recent weakness of China's currency, the renminbi, in currency markets. But the increase in foreign money may not be enough to offset recent moves by wealthy Chinese to send money out of the country, which has sapped the strength of the renminbi. The renminbi's weakness is making Chinese manufacturers even more competitive in foreign markets. Investment executives say officials at the China Securities Regulatory Commission, in coordination with foreign-exchange officials, informed them in the phone calls last week that the government would approve all of their past requests to increase certain types of foreign investments and would allow them to double their total invested. The range of financial institutions with so-called Qualified Foreign Institutional Investor rights in China include big banks like Goldman Sachs and endowment funds like Yale University's. Regulators indicated that they would roughly double the overall cap on all foreign investments to about $60 billion, one of the money managers said; the cap has been $30 billion for several years. While still a tiny amount, relative to the combined value of the Shanghai and Shenzhen stock markets or relative to the volume of China's international trade, the move is the latest signal that Beijing is worried about a potentially prolonged weakness in the renminbi. The issue is politically volatile in Washington, where Democrats and Republicans alike have been calling for a stronger Chinese currency as a way to limit China's large bilateral trade surplus with the United States. The American Treasury secretary, Timothy F. Geithner, complained at a Congressional hearing on Tuesday that China still has "some ways to go" in allowing its currency to appreciate against the currencies of China's main trading partners. Letting in more foreign money could help stabilize the Chinese stock market and real estate market at a time when the country's political environment is unsettled, with the dismissal last week of Bo Xilai as the Communist Party secretary of Chongqing and with the approach next autumn of a once-in-a-decade change in the country's top leadership. The Shanghai stock market dropped 1.4 percent on Tuesday and is down 22.2 percent from its high in mid-April last year, although up slightly from its lows in early January. The government has deliberately engineered a fall in real estate prices to address widespread concerns about housing affordability, and has used mostly administrative tools to do so, like banning most purchases of second or third homes. But real estate developers and investors say the plunge in prices has taken on its own momentum.