PBOC Brings Offshore Yuan Trading onto the Mainland

The People’s Bank of China (PBOC) announced the pilot on Wednesday as part of a broader package aimed at advancing yuan internationalization. Governor Pan Gongsheng named Industrial and Commercial Bank of China (ICBC), Agricultural Bank of China, Bank of China, China Construction Bank, Bank of Communications and China CITIC Bank as the initial participants. The six lenders will conduct offshore renminbi trading on the China Foreign Exchange Trade System (CFETS) platform within the free trade zone’s ring-fence.

The aim, Pan said, "Promote two-way opening of the foreign exchange market, integrate onshore and offshore markets and help Shanghai build into a renminbi asset global allocation and risk management centre."

Hong Kong's three-quarter grip

Hong Kong currently handles around 76% of global offshore yuan payments, according to SWIFT data, and has dominated the CNH market since trading began in 2010. The Shanghai pilot uses the free trade zone’s "first line open, second line controlled" framework – a controlled quasi-offshore environment – to allow offshore dealing on the mainland without fully lifting capital controls on the broader onshore foreign exchange market.

The yuan remains subject to capital controls and is not fully convertible. These restrictions have persisted through four decades of market-opening reforms in goods, services and most other parts of the Chinese economy. The Shanghai pilot is designed to preserve that divide: the ring-fence lets the PBOC introduce offshore dealing on Chinese soil without opening the broader onshore FX market.

That same divide has long underpinned mainland demand for crypto. Despite Beijing's 2021 ban on exchanges and mining, onchain analysis firms have continued to record substantial mainland-linked stablecoin and bitcoin activity routed through OTC and offshore venues, with USDT widely used as a workaround to the $50,000 annual personal FX quota.

Six banks, two layers

The FX pilot was one of several yuan measures Pan announced. Pan also said the PBOC had rolled out a repo tool that lets foreign central banks, sovereign wealth funds and international financial organizations borrow yuan against Chinese government bonds. 

Pan confirmed that the Cross-border e-CNY Transfer Services platform, branded CBETS and the routing and settlement of China's central bank digital currency (CBDC) are now fully operational. That confirmation was followed by the signing of CBETS direct participant agreements with 26 financial institutions on 16 Jun, covering Hong Kong, Macao, Singapore, Laos, Thailand, the UAE, Qatar and Brazil. 

Shanghai-Hong Kong dual hub

Also released on 17 Jun was an offshore finance action plan, dated 11 Jun, signed by the PBOC, other central agencies and the Shanghai government. The plan sets staged targets for 2027, 2030 and 2035. 

Pan framed the package as a Shanghai-Hong Kong dual hub strategy, saying Beijing will continue to "support Hong Kong in building a global offshore yuan business hub" while developing Shanghai's offshore trading capacity. 

CSRC Chair Wu Qing said separately that the regulator is studying yuan FX futures with the PBOC.