China has approved RMB convertibility on the capital account within 10 million U.S. dollars for the Tianjin, Guangdong and Fujian free trade zones (FTZs), the central bank said on Friday.
This is a significant step by China to open up its capital accounts. China allowed RMB convertibility on trade accounts nearly two decades ago, but almost all capital account transactions on the mainland are under varying degrees of control. The move also came less than two weeks after the RMB was admitted by the International Monetary Fund into its Special Drawing Rights basket alongside the dollar, euro, poundsterling and yen on Nov. 30. For each domestic institution outside of the negative list, the cap was set separately for both the cross-border revenue and the expenditure on yearly basis, the People's Bank of China said in guidelines issued Friday. The central bank supports FTZs to promote cross-border use of the yuan.