Mainland banking circles were thrown into brief confusion yesterday after the official Shanghai Securities News reported that the People's Bank of China (PBOC) had stopped approving offshore yuan borrowing by domestic companies in compliance with Beijing's monetary tightening measures.
But PBOC and the Hong Kong Monetary Authority quickly pointed out that the newspaper's report was inaccurate because no existing rules allow mainland companies to borrow yuan funds abroad.
The error stemmed from remarks by Li Bo, director of a monetary policy department at the PBOC, who told a finance forum in Shanghai in May that the central bank would review applications for offshore yuan borrowing 'case by case' under a so-called trial programme.
According to a press officer at the PBOC, the trial run has yet to start. 'We'll publish relevant rules when the policy is implemented,' said the officer.
Shanghai Securities News misunderstood the situation, saying approvals had been suspended as Beijing attempted to avoid an extra inflow of funds just as inflation was soaring. Currently, mainland companies are allowed to secure loans only from domestically incorporated lenders to fund locally based construction and investment projects. They can borrow yuan from banks abroad, such as those in Hong Kong, but only for trade financing.
Beijing has tried to curb domestic bank loans this year in an effort to curb inflation, which hit a three-year high of 6.4 per cent in June.
