Yuanimal spirits

14 January 2011 By John Foley Follow @johnsfoley

A pilot scheme will allow Chinese investors to use their own currency to buy overseas, albeit with restrictions. That lays down the pipes to establish the renminbi as a global currency. But while the capital account remains closed, the yuan flow will be limited.

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Chinese companies will be able to invest directly overseas in their domestic currency for the first time, under a pilot scheme announced by the People's Bank of China on Jan. 13. Avenues for yuan investment will include establishing new companies and acquiring equity in existing ones, but will depend on casebycase approval from the relevant authorities.

Hong Kong's yuan deposits hit 280 yuan ($42 billion) at the end of November, from 217 billion the month before. Yuan traded in the spot market in Hong Kong, which is not fungible with the domestic yuan, was at a 0.3 percent premium to its onshore counterpart on Jan. 14.

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