China will allow non-financial firms in Shanghai's free trade zone (FTZ) to freely convert funds raised from overseas debt markets into yuan, the central bank said on Thursday, confirming an earlier Reuters report. Firms in the free trade zone will be allowed to freely convert their foreign currency capital and money raised from overseas borrowings into yuan, according to the detailed rules issued by the Shanghai branch of the People's bank of China.
It did not say when the rules would take effect. The move will make it easier for firms to make "cross-border financing and investment", the central bank said. The yuan funds must however be deposited in special bank accounts and firms would face some restrictions in using the funds, the central bank added. Last week, China said it would allow limited convertibility of the yuan in three free trade zones (FTZ) in Guangdong, Fujian and Tianjin. The move further liberalised China's capital account after its currency was admitted to the International Monetary Fund's reserve basket.