China's central bank has urged lenders to strengthen verification of cross-border trade settlements in yuan, as part of efforts to curb hot money inflows, the Securities Times reported on Dec 3, citing Fan Linchun, an official of the Guangzhou branch of the People's Bank of China.
Beijing was closely monitoring hot money inflows as the mainland's 2.5 percent yuan deposit rate could attract capital inflows from Hong Kong, where yuan deposits yield less than 1 percent annually, the newspaper said.
According to the report, Fan said it would be hard to judge whether yuan deposits in Hong Kong were a source of hot money because outstanding savings -- totaling around 200 billion yuan ($30 billion) -- were tiny compared with mainland deposit levels, while the government had already taken steps to curb hot money inflows, including asking banks to set aside additional reserves.
The southern province of Guangdong, bordering Hong Kong, plans to allow more exporters to use yuan for cross-border trade settlements, expanding an existing pilot program, the newspaper reported.
Except for the city of Shenzhen, Guangdong plans to expand the number of such exporters to 5,000 from 270, the article said, adding that a total of 365 exporters nationwide had joined the scheme so far.