China will encourage companies to increase their use of yuan for settling cross-border trade deals and support foreigners’ use of the currency for direct investments in the country, the central bank said on Friday.
Beijing has been promoting the international use of the yuan since 2009, and yuan settlement accounted for 16.9% of China’s total goods trade in 2016, Reuters reported.
A set of moves unveiled Friday will help “improve policies on yuan cross-border businesses, create a sound business environment and serve the ‘Belt and Road’ initiative”, the People’s Bank of China said in a statement on its website.
Banks are encouraged to innovate their financial products to help companies settle trade deals in yuan, the central bank said. The PBOC told Chinese banks to allow foreign investors to freely remit their yuan-denominated profits and dividends.
Chinese firms will be allowed to transfer their funds raised from overseas bond and stock issuance back home, based on their actual needs, the central bank said.
Beijing will make it easier for Chinese workers involved in “Belt and Road” work abroad to send their earnings back home, and meet workers’ demand for cross-border yuan settlements in wages and social welfare, the central bank said.
It also said China will also allow foreign institutions to use yuan in carbon emissions trading domestically.
Meanwhile, China’s primary money market rates dropped this week as demand for funds eased after peak cash demand at the end of the year.
The volume-weighted average rate of the benchmark seven-day repo traded in the interbank market, considered the best indicator of general liquidity in China, was about 41 basis points lower than the previous week’s closing average rate of 3.091%.
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