CDB set to sign memorandum on yuan loans to its four BRICS counterparts

China Development Bank (CDB) will sign a memorandum of understanding (MoU) with Brazilian, Russian, Indian and South African counterparts to make yuan loans available to them, in a major move to boost the currency's international status, according to two bank staff.

Corporate borrowing in yuan from Hong Kong banks has already picked up in recent months after the currency's appreciation slowed, with Beijing announcing a series of measures to help invest yuan accumulated offshore back on the mainland.

The plan to promote yuan loans among BRICS nations would take the internationalisation of the currency to the next stage, economists said.

'It's a high-profile move to further open up China's capital account, as the country is now promoting usage of yuan loans outside Hong Kong,' said Raymond Yeung, an economist at ANZ bank.

China has so far mostly promoted the yuan as a settlement currency with trade partners such as in Latin America, said Yeung. CDB's expected MoU, however, did not mean the yuan would replace the US dollar or become a main reserve currency overnight, he said.

Gonzalo Torano, BBVA's Asia-Pacific head, said that while CDB might wish to facilitate more yuan loans to BRICS, the currency might not be the most favourable for borrowers as it has been relatively strong.

'The problem is, if you are a BRICS country and you get debt in yuan and you get your income in local currency, which might not be so strong, then this will not be a good solution,' said Torano.