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Firms allowed to give yuan loans to overseas units

Under the new rules, multinationals can cut costs by moving yuan freely via a money pool

PUBLISHED : Thursday, 11 July, 2013, 12:00am
UPDATED : Thursday, 11 July, 2013, 3:17am

The mainland's central bank released rules allowing firms to move yuan abroad more freely as Beijing seeks to bolster global use of the currency.

Companies could now open accounts with local banks through which they could lend in yuan to affiliated firms overseas, the People's Bank of China said on its website yesterday.

The so-called yuan-pool lending could be shared between subsidiaries or affiliated firms of one company, the PBOC said.

Beijing has promoted the role of the yuan in international trade and financing as it moves to reduce control over the currency and open up its financial markets.

The mainland has expanded channels for cross-border capital flows and foreign investments and set up direct trading of the yuan with more currencies.

"Allowing multinationals to lend yuan out via a money pool can help them reduce costs," said Zhang Bin, a researcher with the Chinese Academy of Social Sciences. "The move is in line with China's direction of capital account opening."

The authorities had earlier allowed companies to lend yuan to their affiliates as part of a trial programme.

Standard Chartered announced in November that it won approval from the PBOC to help an unidentified American company lend 3.3 billion yuan (HK$4.1 billion) to its overseas affiliates.

Citigroup said in January that it had completed a cross-border yuan transaction for a European food company.

The central bank also said yesterday that it would allow firms to move yuan raised overseas back into the mainland through yuan accounts with local banks.

Companies might also provide yuan-denominated guarantees for their foreign operations, it said.

The PBOC amended a rule on the processing of credit-card payments, deleting a requirement that cross-border transactions be processed by China UnionPay.

The regulation now requires such transactions to be processed by "a domestic bank-card clearing entity", paving the way for the government to approve other processors in addition to UnionPay.

Visa, MasterCard and American Express were among firms that won partial support last year from World Trade Organisation judges in a US claim that China unfairly restrained the payment processors.

The central bank also issued rules for the country's online payment industry.

The regulations outline requirements for service providers, including rules for information security and risk management.

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