In an effort to energise cross-boarder yuan lending, the the People's Bank of China has announced that
firms located in Shenzhen's Qianhai development zone will be allowed to borrow directly from Hong Kong banks in yuan.
The new regulation is expected to boost Hong Kong's offshore yuan business and enable much of the yuan that has accumulated offshore to flow back to the mainland.
According to the Hong Kong Monetary Authority, the new measure would promote the development of Qianhai as a test bed for yuan convertibility on the capital account and cross-border lending. It would also give Hong Kong banks more opportunities to expand yuan currency lending.
The interest rates and tenure of loans taken by Qianhai companies from Hong Kong banks should be determined by the parties involved, the PBOC said.