StanChart gets 1st cross-border yuan lending quota

Standard Chartered Bank (China) said on Monday it had secured approval for a yuan-denominated loan quota on behalf of an American multi-national company, becoming the first overseas bank to get such a cross-border quota for a client.

The quota is part of a pilot program that supports foreign and local multi-national companies which have plans to channel surplus yuan from the mainland to fund activities overseas.

Citizens pass by a Standard Chartered?bank in Hong Kong,?Aug 15, 2012. [Photo/Xinhua]

Standard Chartered obtained a 3.3 billion yuan ($530 million) lending quota from the People's Bank of China Shanghai branch for an unnamed American client that specialises in global manufacturing and technology, the bank said in a statement.

This scheme has transformed the lending of yuan between companies from one based on a traditional entrustment loan - with banks as intermediary agents - to one where two parties sign lending agreements directly, it added.

The quota is expected to support the company's Chinese office to lend yuan to its overseas parent or other related companies which can in turn settle yuan-denominated invoices.

"RMB cross-border lending brings huge flexibility of corporate treasury management," said Anthony Lin, Standard Chartered (China)'s head of Transaction Banking.

"It allows corporations to negotiate lending frequency and rate according to their actual needs. It also enables corporations to transfer onshore RMB surplus to their global cash pools for central deployment and use."

China has a tight grip over its capital account, but plans to fully liberalise it by 2020 and make the yuan one of the world's major currencies to reduce its reliance on the US dollar.

The country has introduced various schemes to increase the global use of its currency, including yuan cross-border trade settlement, yuan overseas direct investment and foreign direct investment.