China selected 10 domestic conglomerates and multinational corporations in Beijing and Shenzhen to participate in a trial program that allows them to more freely convert yuan funds into foreign currencies.
Under the trial, the multinational enterprises are allowed to manage their use of foreign currencies and renminbi in one single cross-border cash pool and buy foreign currencies at will within certain limits for overseas payments, according to a statement by the People’s Bank of China (PBOC) and the State Administration of Foreign Exchange (SAFE).
The pilot program is part of China’s push to internationalize the yuan. Currently, multinationals operating in China need to keep a separate local currency cash pool supervised by the PBOC and a foreign currency pool supervised by SAFE. They need to seek SAFE approval every time they want to buy foreign currency under the capital account, several regulators and bankers told Caixin. Such controls deny businesses the freedom to buy and sell foreign exchange at will to hedge against currency fluctuations.
