China approves cross-border yuan loans in pilot zone near Hong Kong
China has issued rules allowing companies in a pilot zone near Hong Kong to borrow yuan from Hong Kong banks, a step towards opening China's capital account and internationalising its currency, according to an announcement on the website of the Shenzhen branch of the central bank.
The People's Bank of China (PBOC) will allow companies in the city of Qianhai, a special economic zone in Shenzhen near Hong Kong, to borrow yuan from banks in Hong Kong, with tenors and interest rates to be set independently, according to the statement.
"The cross-border renminbi loan business will give Qianhai important financial support and at the same time accelerate the use of cross-border renminbi," the statement said.
The announcement also said that the move would increase the scale of Hong Kong banks' yuan loan services and invigorate liquidity in the offshore yuan market.
The Hong Kong Monetary Authority (HKMA) issued a statement on Friday welcoming the announcement, saying it would improve usage and circulation of yuan between Hong Kong and the mainland.
"This step will help Shenzhen's Qianhai utilize Hong Kong's mature offshore yuan services platform to support its own development," the HKMA said.
'MINI-HONG KONG'
Market observers have been waiting to see how aggressively Beijing moves in the Qianhai test bed, which some have dubbed a "mini-Hong Kong".
The project was announced in June as Hong Kong marked the 15th anniversary of its return to China, but at that time there were few specifics about how liberalised the zone would actually
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