PBOC’s Policy Aimed at Controlling Volatile Market Sentiments
The Central Bank of China said that the variable policy parameters for cross-border financing of the yuan are aimed at improving the country's financial supervision in the markets. Counter-cyclical management of the RMB cross-border financing will help to control volatile market sentiments and large-scale consequences, which caused significant fluctuations in the inflow of cross-border capital flows.
Earlier this month, the People's Bank of China (PBOC) said that the upper limit of cross-border financing of Chinese commercial banks is determined by their outstanding deposits and the countercyclical factor, which currently stands at 3%.
According to the rules of the central bank, issued in 2009, Chinese commercial banks are allowed to provide yuan financing for selected foreign banks, with the upper limits for such financing being 1% of their outstanding deposits.