China has raised the upper limit on domestic companies’ offshore yuan lending business to help firms go global and expand the yuan’s cross-border use, the country’s central bank announced.
The People’s Bank of China and the State Administration of Foreign Exchange recently decided to raise the macro prudential adjustment coefficient for domestic firms making overseas loans from 0.3 to 0.5 based on their business needs, the two jointly announced yesterday.
Raising the coefficient will permit a higher upper limit on overseas loans made by domestic firms. The PBOC is not seeking yuan appreciation as the redback has already surged since the years’ start, Ming Ming, deputy director of CITIC Securities Research Institute.
In the offshore yuan lending business domestic companies loan or entrust finance companies to extend credit in yuan-denominated funds to overseas firms via settlement banks.
The PBOC controls the upper limit of overseas loans made by domestic firms by adjusting the macro prudential adjustment coefficient and the currency conversion factor based on the macroeconomic situation and cross-border capital flows.
