China said on Friday it would allow businesses in some regions to invest more money abroad in its latest move to deflect U.S. pressure for a revaluation of its yuan currency.

Fourteen trial provinces or regions would be allowed to approve overseas investments of up to $3.0 million, versus a previous ceiling of $1.0 million, the State Administration of Foreign Exchange (SAFE) said on its Web site.

"Provincial foreign exchange administrations can approve proposals for foreign exchange capital of overseas investment projects with a limit of $3.0 million," it said in a statement on www.safe.gov.cn. The measures will take effect on November 1.

In other moves this year to ease upward pressure on the yuan, China has cut export incentives, tightened rules on lending to property investors and restricted quotas for foreign banks investing in Chinese stocks and bonds.

The announcement comes hours after a much-anticipated report from U.S. Treasury Secretary John Snow ducked local lawmakers' call for more strident action to punish Chinese exporters.

"There are two games going on," JP Morgan's Singapore-based currency strategist James Malcolm said of the U.S. stance.

"One is the domestic political game in terms of people trying to pressure the Bush administration, and then there is the diplomatic game in terms of how do you convince the Chinese that it is in their interest to move a little bit sooner than they were planning on doing and a little bit more aggressively."

The report said China had not violated U.S. law by keeping its currency fixed to the dollar, but vowed to keep up pressure on China to let market forces set the value for the yuan.

Malcolm said China's moves, such as the easing of investment restrictions, were not that significant individually, but there had been a series of changes and diplomatic deals that were quietly adding up toward a more liberalized yuan.

"There's some sort of material progress. We're definitely not there yet, but there's a little bit more to show than most people thought there would be," he said.

Frank Gong, Hong Kong-based chief market strategist for Bank of America, said the move was not a surprise and would allow more dollars to leave China, which has benefited from waves of U.S. investment.

"That will ease the pressure on the currency to appreciate and that's the exactly the right policy," Gong said. "China is at the stage that they need to increase their investment in overseas markets."

The yuan is pegged at about 8.3 to the ailing dollar. U.S. manufacturers have accused China of pumping up the trade deficit by keeping the yuan unfairly low, leading to job losses in U.S. factories.

China has so far resisted calls for a revaluation of the yuan, also known as the renminbi, but it has pledged to ease capital curbs further to take the pressure off.

A Chinese central banker was quoted by the official Xinhua news agency as saying China would continue with a sound monetary policy to maintain the stability of the yuan, the latest in a string of similar comments by Chinese officials.

"The objective of China's monetary policy is to keep the renminbi (yuan) stable and boost the country's economic growth within a stable financial environment," Xinhua quoted Mu Huaipeng, deputy director of the currency policy department at the People's Bank of China, as saying.

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