China updates rules on cross-border yuan transactions

BEIJING (REUTERS) - China's central bank has standardised rules on cross-border yuan transactions for domestic banks and companies, the latest step to boost the yuan's global influence.

Under the new guidelines published by the People's Bank of China on Wednesday, Chinese banks will be able to provide settlement services for qualified companies involved in offshore yuan lending and bond issuance.

Offshore yuan loans should be returned via a special bank account, and the amount cannot exceed the original principal plus the interest and related taxed and fees, the central bank said in a statement on its website.

The tenors of yuan credit lines provided by domestic banks to overseas banks will be extended to one year. The credit lines must not exceed 3 per cent of the outstanding yuan deposits of any domestic bank at the end of the previous year.

China launched a cross-border yuan trade settlement programme as a pilot scheme in 2009 and gradually expanded it to cover trade between all Chinese provinces and foreign countries.

For non-financial companies that plan to issue yuan-denominated bonds in the offshore market, they will be required to open a special deposit account at a domestic bank to keep the remitted proceeds raised via the bond issuance.

The money in such accounts will be offered the same interest rate as that for demand deposits in domestic banks and the cash raised through bond sales must be strictly used for the purpose described in the prospectus, the central bank added.

Local branches of the central bank must conduct off-site inspections regularly to prevent potential risks.