China took a fresh step on Monday to promote use of the yuan outside the mainland, giving approval to another batch of overseas banks to trade in the onshore bond market using yuan accumulated overseas.
Eight more banks may now trade in the onshore interbank bond market using yuan in deposit accounts in Hong Kong, following an earlier group of seven institutions given permission in January, the central bank said in a statement posted on the official website for the bond market, www.chinabond.com.cn.
The move by the People's Bank of China (PBOC) makes it easier for banks outside the Chinese mainland to bring yuan, accumulated offshore as a result of trade settlement or central bank swaps, back into the Chinese mainland. China first announced it would open up the interbank bond market to select offshore investors last August.
The central bank has said it intends to broaden channels for yuan to flow back into the mainland from offshore deposit accounts this year, including through allowing more foreign banks to buy bonds in the interbank market.
Trade settlement in yuan has soared since landmark reforms taken by authorities last July to promote Hong Kong as an offshore yuan trading hub, but investors are searching for ways to use their growing yuan deposits. Yuan deposits in Hong Kong increased 17.7 percent in January to 370.6 billion yuan ($56.4 billion) in January from a month earlier, according to Hong Kong Monetary Authority data, and up from 103.7 billion yuan in July 2010.
As of December, only five overseas banks including HSBC and Standard Chartered were allowed to trade in the mainland bond market, within a quota of 29.2 billion yuan.
In January, the central bank allowed a group of seven banks to invest in the onshore bond market.