Offshore RMB plan starts (2)

"The policy offers banks in Hong Kong a new channel to deploy their renminbi funds, and will increase their willingness to hold the mainland currency," Liu Dongliang, a foreign exchange analyst at China Merchants Bank, told the Global Times Monday.

DBS Bank said Monday that it holds a positive view of the prospects of yuan development by banks in Hong Kong, and expects the size of cross-border yuan loans to gradually expand after the cross-border program's launch.

Liu warned of the scheme's potential risk. "The interest rate of yuan loans in Hong Kong is lower than that in the mainland, so the launch of cross-border loans might result in arbitrage," Liu said.

The State Council agreed in June 2012 to a pilot program of financial reform in Qianhai Bay economic zone, a 15-square-kilometer area near Hong Kong.

The cross-border yuan loan scheme is part of China's efforts to internationalize its currency.

Yi Gang, vice governor of China's central bank, said China is determined to pursue the internationalization of the yuan on a market-oriented basis, and the central bank is removing discrimination against the yuan and will let it act just as other reserve currencies do, the Xinhua News Agency reported Monday.