China's Premier flags closer ties between Hong Kong and Guangdong zone after yuan's inclusion in special drawing rights

Beijing would encourage the Guangdong free-trade zone to cooperate with Hong Kong and Macau in pioneering financial reform as it sought to make the yuan a convertible currency under the capital account "in an orderly way", Premier Li Keqiang said on Wednesday.

His remarks came two days after the International Monetary Fund granted reserve currency status to the yuan.

The central government would encourage the free-trade zone in Guangdong to deepen its ties with Hong Kong and conduct "innovative trials" in cross-border use of the yuan and in opening the capital account, Li said in a statement released after a regular State Council meeting.

Tianjin and Fujian had been instructed to conduct similar experiments in their free-trade zones, Li said.

Beijing has been relying on a top-down approach to relaxing capital controls. This has included opening the interbank bond market to foreign central banks and creating a stock link between Shanghai and Hong Kong.

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Beijing has also been encouraging bottom-up trials, in which local governments make rules that apply only to small designated areas, with mixed results.