Cross-Border Yuan Lending Trial Detailed

Chinese authorities will select an initial group of between eight and 10 banks to participate in a trial version of a new cross-border lending program in Shenzhen's Qianhai Bay development zone, the state-run China Securities Journal reported Wednesday, citing an unnamed official from Qianhai.

The participating banks include China Merchants Bank Co. (3968.HK), China Construction Bank Corp. (0939.HK), Standard Chartered PLC (2888.HK), Hang Seng Bank Ltd. (0011.HK), HSBC Holdings PLC (HBC), Bank of East Asia Ltd. (0023.HK), Industrial & Commercial Bank of China Ltd. (1398.HK), and Bank of China Ltd. (3988.HK), the report said.

Under the program, companies registered in Qianhai--a special business zone being jointly developed by Shenzhen and Hong Kong--and have operations or investment there will be allowed to borrow yuan from Hong Kong banks.

The borrowing will be settled through banks in Shenzhen and the duration of the loans and the interest rate will be decided jointly by borrowers and lenders.

The program will help increase the circulation of yuan currently sitting offshore in Hong Kong, and give banks a more profitable way of deploying their holdings of the Chinese currency.

China restricts flows of yuan funds back into the country, leaving Hong Kong's lenders with limited investment options.

Write to [e-mail]

Subscribe to WSJ: http://online.wsj.com?mod=djnwires