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PBOC lets foreign banks to settle HK trade in Yuan |
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Commodity Online
BEIJING : China’s central bank, People's Bank of China on Thursday said it will allow foreign banks to buy or borrow Yuan from Chinese mainland lenders for the first time to settle trade in Hong Kong and Macau.
In a statement issued here it said foreign banks settling imports and exports in yuan in Hong Kong and Macau will be allowed to buy Chinese currency from mainland banks within certain limits.
However the central bank did not disclose the quotas, which it will set.
The central bank chiefs of China and Hong Kong signed a memorandum on Monday, paving the way for the scheme, which analysts say is a step toward greater international use of the yuan.
The rules make clear that China will be checking to ensure that banks and companies do not try to use the pilot programme to get round the country's capital controls. To that end, any yuan loans must be supported by trade documentation.
"Domestic settlement banks should take effective measures to know the nature and purpose of their clients' trading," the PBOC said.
Exporters will be allowed to keep their yuan earnings outside China, according to the rules, which took effect on Wednesday.
Chinese banks will also be allowed gradually to extend trade finance in yuan to overseas companies, the PBOC said.
The programme will initially be piloted by about 440 firms in Shanghai and the southern province of Guangdong.
The PBOC statement said the rules would apply to a separate yuan-settlement trial between the Association of South East Asian Nations and the Yunnan and Guangxi regions in southern China.
Chinese export firms involved in the trial will continue to qualify for export tax refunds. Usually, companies need to provide documentation showing they are being paid in dollars in order to receive tax rebates.
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