The central government will support Hong Kong's development of yuan business, as it seeks to expand the adoption of the yuan as a settlement currency in trades. As part of a 30-point directive issued at the weekend by the State Council, Beijing said it 'supports yuan business development in Hong Kong' and would expand the currency's scale of settlement in trades with neighbouring nations. 'This will lower the foreign currency risk in external economic activities,' the State Council said. It also said Hong Kong companies and financial institutions with 'relatively abundant' business on the mainland would be permitted to issue yuan bonds in Hong Kong. Beijing will study allowing overseas institutions and enterprises to issue yuan bonds on the mainland. Chief Executive Donald Tsang Yam-kuen is due to report this week to leaders in Beijing on Hong Kong affairs and is expected to discuss the expansion of yuan business. Central bank officials last month said Beijing was considering letting Hong Kong banks incorporated on the mainland issue yuan bonds in Hong Kong, conduct currency swaps and use yuan to settle Hong Kong-mainland trades. They said Beijing was exploring the possibility of using Hong Kong as a centre for trade settlement between Taiwan and the mainland. Hong Kong Monetary Authority chief executive Joseph Yam Chi-kwong has called for fewer restrictions on yuan bond issues in the city, saying it would promote wider use of the currency in global markets. Yuan bond sales in Hong Kong have so far been limited to financial institutions. Separately, the State Council said listed banks would be allowed to trade bonds on mainland stock exchanges on a trial basis, as part of policies to develop a 'multi-tiered' financial market. It will also encourage insurance firms to 'enhance their role as investors' by buying government and corporate bonds, bonds of transport, telecommunications and energy projects, and equity in state energy and resource companies.