The People's Bank of China (PBOC), the central bank, announced Tuesday it would allow overseas financial institutions to invest in the country's interbank bond market on a trial scheme as an effort to further promote yuan cross-border trade settlement.

Under the trial program, yuan accumulated overseas because of central bank currency swaps, trade settlement or yuan investment could be used to invest in the country's interbank bond market, it said.

Yuan clearing banks in Hong Kong and Macao, overseas banks involved in yuan cross-border trade settlement and foreign central banks or monetary authorities that have signed currency swap agreements with China would be permitted to make the investment, the PBOC said.

China's interbank bond market now trades more than 10 different kinds of bonds, including treasury bonds and bonds issued by the country's policy banks.

The country has been striving to push forward internationalization of the yuan and the latest development is aimed to expand yuan trade settlements.

Cross-border yuan trade settlement is now allowed in all countries and regions of the world, after starting first in Hong Kong, Macao and 10 member states of the Association of Southeast Asian Nations last year.

Since late 2008, China has signed currency swap agreements with Republic of Korea, Malaysia, Belarus, Indonesia, Singapore, Argentina and Iceland, as well as Hong Kong.

(Xinhua News Agency Aug 18, 2010)