Rapid growth of yuan-denominated foreign loans in China
Volumes of foreign loans denominated in yuan in China are rising rapidly amid increasing demand. The People’s Bank of China has simplified cross-border financing (bonds and interbank loans) in yuan between local and foreign banks and institutions, aiming to promote the use of offshore yuan outside the country.
Following this, the central bank allowed foreign investors at the end of January to participate in repo transactions on the domestic market. These initiatives are expected to boost cross-border financing. To meet growing demand for offshore yuan, Hong Kong has doubled the total volume of its so-called “repo lending scheme” starting this month, providing banks with the liquidity needed as clients increasingly use yuan for trade finance.
These measures indicate China’s desire to strengthen the yuan’s international role and encourage more global transactions in its currency, a trend likely to continue in the near future.
