HONG KONG HSBC said on Friday it had completed a two-way cross-border yuan lending transaction for a Taiwanese company under a pilot program China introduced in August, becoming the first foreign bank to conduct such a transaction.
The city of Kunshan, in Jiangsu province, got the go-ahead last month to allow cross-border, two-way yuan lending for Taiwanese companies, which enables them to utilize their onshore and offshore yuan funds more efficiently with better flexibility.
It will also help companies optimize the allocation of yuan funds within a corporate group, reduce external borrowing, and improve returns on capital.
"The cross-border RMB pilot programs in Kunshan will further enhance RMB usage offshore and encourage RMB flow between onshore and offshore markets," Helen Wong, Deputy Chairman of HSBC China said in a statement.
The deal was done for Kunshan President Enterprises Food Company Limited, a subsidiary of Uni-President Group (1216.TW).
HSBC said it had set up a master account and obtained a two-way lending quota totaling 1.49 billion yuan ($243.5 million) for the company.
The first transaction has been completed, with 10 million yuan transferred to this master account from its related overseas company.
The world's second-largest economy has stepped up efforts to open up its capital account recently with the aim of lifting the global status of the "redback" and finally making it on par with the U.S. dollar.
China's State Council in July approved the establishment of a free trade zone (FTZ) in the country's mainland financial centre where yuan funds will be converted freely, while there are also signs that laws curbing foreign investment could be suspended.
In Kunshan Experimental Zone, a range of pilot projects for cross-border renminbi (RMB) services was approved in August for industry cooperation between mainland China and Taiwan, including the yuan two-way intra-group lending.
HSBC (HSBA.L)(0005.HK) said it also completed its first cross-border yuan remittance for individuals, another pilot initiative that was approved for the Zone. The bank helped an overseas resident in Kunshan transfer his RMB income to his RMB account in Taiwan.
($1 = 6.1199 Chinese yuan)
(Reporting by Michelle Chen; Editing by Kim Coghill)