The Central Bank of China has taken on step further to make its currency easier for the international market. It has increased the number of companies allowed to use the Yuan for cross-border transactions.
Last Wednesday, the People's Bank of China released a notice that allows non-financial companies to utilize the Yuan held in their companies in China to be extended as loans to its overseas affiliates. These subsidiaries or affiliates include firms based in China that hold shareholdings in or in companies with common shareholders.
This notice would assist in the c's use across borders for trade and investment purposes. This though still lies in the shadow of China's hawk like control over its international fund flows. The notice further asked domestic banks in China to pay for offshore cash withdrawals by Yuan denominated bank accounts with the currency in coordination with their overseas counterparts.
In recent months, Chinese officials have been increasing rhetoric about allowing the Yuan to be used more freely in the international market. This hints that Beijing would be releasing a plan allowing the Yuan being easier to convert in the capital account market in the year to provide funds for Chinese businesses to make investments overseas.
Just last month, the central bank had reached a three year deal with the Bank of England for currency swaps. This is the first agreement signed between China and another developed economy after it had forged deals with Hong Kong, New Zealand and Singapore.
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