According to the new regulations, the limits on lending by local banks outside the country in yuan will depend on their capital conditions. The central bank will have the ability to regulate these limits to manage potential risks.
Each transaction between banks in yuan must comply with new regulatory requirements, which mandate institutions to establish effective risk management and internal control systems.
These initiatives aim to maintain liquidity in the offshore market and promote broader use of the yuan in international financial transactions.
This measure aligns with Beijing's intentions to enhance the yuan's significance as a global currency for financing, as noted in the report.
It is worth mentioning that these changes are a result of the People's Bank of China's decision at the end of January, when foreign investors were allowed to participate in REPO operations in the domestic market. Such initiatives are expected to foster growth in cross-border financing.
To meet the increased demand for offshore yuan, Hong Kong has doubled the total volume of its yuan business lending program since the beginning of the month. The previously allocated quota for banks has been exhausted, as clients have started to use yuan more actively for trade financing, capital investments, and other business needs.
