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Exclusive: China central bank bans some offshore yuan deposits and lending via FTZ scheme – sources

Exclusive: China central bank bans some offshore yuan deposits and lending via FTZ scheme - sources© Reuters. FILE PHOTO: Illustration photo of a China yuan note

SHANGHAI (Reuters) – China’s central bank has restricted commercial banks from using some interbank accounts to deposit or lend yuan offshore through free trade zone schemes, two sources with direct knowledge of the matter said on Thursday.

The move was announced in a notice by the Shanghai branch of the People’s Bank of China (PBOC) on Thursday morning, the sources said.

The restriction on deposits and lending applies to some Free Trade Accounting Unit (FTU) businesses though it is not expected to affect cross-border capital flows that reflect real demand, according to the notice.

The move was aimed at tightening offshore yuan liquidity and making shorting the Chinese currency more expensive, traders said.

The Shanghai branch of the PBOC did not immediately respond to a Reuters query on the matter.

FTU businesses were introduced through financial reforms in the Pilot Free Trade Zone in Shanghai, and are managed by Chinese banks separately from their ordinary domestic accounts.

China’s yuan strengthened on Thursday, with the offshore yuan trading at 6.8966 per dollar as of 0728 GMT, up from its previous close of 6.9470.

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Source: Investing.com

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