China unveils rule on foreign direct investment in yuan

China promulgated Friday a rule on foreign direct investment (FDI) made in the yuan, a move seen to promote the use of the Chinese currency by foreign investors. The central People's Bank of China (PBOC) announced it has issued regulations about FDI settled in the Chinese currency. The Chinese Ministry of Commerce also declared a notice on cross-border FDI made in the yuan. Under the new regulations, foreign institutional and individual investors will be able to apply for permits to make direct investments in China using the yuan as a settlement. The move comes after Chinese Vice Premier Li Keqiang endorsed the Chinese currency-denominated FDI during his visit to Hong Kong in August. In a bid to boost the internationalization of the yuan, China has been moving to develop an offshore center in Hong Kong for trading yuan products so that the yuan may be circulated freely outside of mainland China via Hong Kong. "(The regulations) will further promote cross-border trade and investment settled in the yuan and support the development of the yuan market in Hong Kong," the PBOC said in a statement. John Tsang, financial secretary for the government of the Hong Kong Special Administrative Region, welcomed the promulgation, saying it will further promote the development of the yuan bond and securities markets, and will expedite the development of the offshore yuan business of Hong Kong. "Enterprises can make use of the yuan fund-raising platform in Hong Kong by financing direct investments in the mainland (China) through banks, debt and equity," he said.