Tighter rules for offshore yuan deals
By Zhang Fengming |
June 22, 2011, Wednesday
|
Print Edition
Print Edition
CHINA has tightened regulations on offshore yuan transactions to curb speculative capital flows.
Overseas banks doing yuan transactions in offshore markets must ensure these are backed by trade settlements or business needs, according to a recent statement issued by the People's Bank of China.
Settlements must be made within three months of the transaction, the statement said.
Analysts said the bank could be trying to create tighter supervision to ensure cross-border trade is not used to speculate on the yuan's appreciation.
Hong Kong is a key market for yuan transactions.
China is slowly taking steps to internationalize the currency, and the yuan trade settlement program is a key part of the strategy.
Yuan trade settlement totaled 360 billion yuan (US$55 billion) in the first quarter, Xinhua news agency reported earlier, citing the central bank. It was 15 percent more than the final quarter of 2010 and almost 20 times higher than a year earlier.
China is now poised to begin trial operations of direct overseas investment in yuan to broaden investment options in the currency.
Strategic industries and key sectors under macro-tightening are not open to yuan-backed foreign direct investment.
Yuan accumulated overseas through cross-border trade settlement and central bank swaps can now be channeled back into the Chinese mainland's interbank bond market in a trial program.
The yuan has gained 2 percent this year versus the US dollar to 6.47 yesterday.
The yuan will overtake the British pound this year as the world's third most popular trade currency, an HSBC survey said in May.
Overseas banks doing yuan transactions in offshore markets must ensure these are backed by trade settlements or business needs, according to a recent statement issued by the People's Bank of China.
Settlements must be made within three months of the transaction, the statement said.
Analysts said the bank could be trying to create tighter supervision to ensure cross-border trade is not used to speculate on the yuan's appreciation.
Hong Kong is a key market for yuan transactions.
China is slowly taking steps to internationalize the currency, and the yuan trade settlement program is a key part of the strategy.
Yuan trade settlement totaled 360 billion yuan (US$55 billion) in the first quarter, Xinhua news agency reported earlier, citing the central bank. It was 15 percent more than the final quarter of 2010 and almost 20 times higher than a year earlier.
China is now poised to begin trial operations of direct overseas investment in yuan to broaden investment options in the currency.
Strategic industries and key sectors under macro-tightening are not open to yuan-backed foreign direct investment.
Yuan accumulated overseas through cross-border trade settlement and central bank swaps can now be channeled back into the Chinese mainland's interbank bond market in a trial program.
The yuan has gained 2 percent this year versus the US dollar to 6.47 yesterday.
The yuan will overtake the British pound this year as the world's third most popular trade currency, an HSBC survey said in May.
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