BEIJING--China officially launched a trial version of its new
cross-border yuan lending program in an area near Hong Kong Monday,
with 15 banks agreeing to loan a combined 2 billion yuan ($320
million) to Chinese firms, the state-run Xinhua News Agency
said.
The program is designed to boost the yuan's international role
by facilitating its cross-border use despite China's controls on
capital movements. It will also allow banks in Hong Kong to make
more effective use of yuan deposits in Hong Kong, which has become
the key offshore currency market for use of the yuan. China
restricts the flow of yuan funds back into the country, leaving
Hong Kong's lenders with limited options for using the
currency.
China has said it would allow companies registered in Shenzhen's
Qianhai Bay economic zone near Hong Kong to borrow yuan from Hong
Kong banks at interest rates jointly decided by the borrowers and
lenders, which would effectively become market rates.
In a signing ceremony in Shenzhen, 15 banks from Hong Kong,
including BOC Hong Kong (Holdings) Ltd., HSBC Holdings Plc
(0005.HK) and Hang Seng Bank Ltd (0011.HK), agreed to provide yuan
loans for 26 projects in Qianhai, the news agency said.
Nineteen Chinese companies obtained the loans, including
Shenzhen units of internet giant Tencent Holdings Ltd. (0700.HK)
and telecom equipment maker ZTE Corp. (0763.HK, 000063.SZ),
according to Xinhua, which added that the companies were also
eligible to receive subsidies from the local government.
A source who attended the signing ceremony told Dow Jones
Newswires that most of the loans would be in the range of CNY200
million to CNY300 million.
Yuan deposits in Hong Kong, including certificates of deposit,
totaled CNY720.2 billion as of the end of 2012, up 9% from CNY661.6
billion at the end of 2011, the Hong Kong Monetary Authority said
Monday. Outstanding yuan loans totaled CNY79.0 billion, up 157%
from end-2011, it said.
The Qianhai program also dovetails with the People's Bank of
China's efforts to make interest rates more market-based. The
central bank sets guidelines for interest rates in mainland
China.
Moreover, the use of yuan currently parked in Hong Kong will
benefit local borrowers, allowing them to make use of cheaper yuan
funds. While there is no standard interest rate for yuan borrowings
in Hong Kong, interest rates would be considerably below the
central bank's guideline lending rates.
In a separate statement about the same signing ceremony, BOC
Hong Kong said that it and Nanyang Commercial Bank signed
agreements with five enterprises registered in Qianhai to provide
yuan loans.
Meanwhile, Shenzhen branches of two state-owned banks--China
Construction Bank and Bank of Communications--also agreed to extend
a total of CNY620 million in loans to several companies in Hong
Kong, according to local media reports.
Write to Grace Zhu at grace.zhu@dowjones.com and Fiona Law at
fiona.law@dowjones.com
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