China allows foreign banks to access yuan for SARs trade

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China's central bank has introduced a pilot scheme to allow foreign banks to borrow yuan from mainland lenders to help corporations settle trade in the special administrative regions of Hong Kong and Macao.

China's central bank has introduced a pilot scheme to  allow foreign banks to borrow yuan from mainland lenders  to help corporations settle trade in the special  administrative regions of Hong Kong and Macao.

The People's Bank of China said on Thursday that foreign banks will now be allowed to buy Chinese currency within an undisclosed quota. The rules, effective from Wednesday, stipulate that exporters will be allowed to keep their yuan earnings outside China. The programme will be initially piloted by about 440 firms in Shanghai and Guangdong.

The PBOC said it will also apply to a separate yuan-settlement trial with the Association of South East Asian Nations. The People's Bank of China and the Hong Kong Monetary Authority signed a memorandum on Monday, paving the way for the new scheme. Analysts say this is a step towards greater international use of the yuan.