China will encourage more overseas institutions to issue panda bonds and integrate cross-border investment channels to attract foreign participation in its onshore market, as part of the country's ongoing efforts to foster a sound environment for using the renminbi, said the People's Bank of China, the country's central bank.

"We will encourage and support more qualified overseas institutions to issue panda bonds within the country," the central bank told China Daily, as it aims to strengthen the Chinese currency's function of financing.

Panda bonds are renminbi-denominated bonds issued in the onshore market by overseas institutions. The total outstanding size of offshore renminbi bonds and panda ponds has reached about 2 trillion yuan ($280.6 billion), data from the PBOC showed.

The central bank said it will also integrate investment channels as appropriate to attract more overseas institutions to invest in the onshore market in an orderly manner, as part of broader efforts to expand high-level, two-way opening-up of financial markets.

"Efforts will be taken to increase transparency, improve rule-based mechanisms and strengthen predictability," the PBOC said, adding that authorities will also comprehensively clear, refine and integrate policies on renminbi settlement for cross-border trade and investment.

During the 14th Five-Year Plan period (2021-25), the global appeal of renminbi-denominated assets have risen markedly as the country deepened financial market opening, with overseas entities holding more than 10 trillion yuan worth of onshore renminbi financial assets while yuan deposits in major offshore markets reaching 1.6 trillion yuan.

So far, the renminbi has become China's largest settlement currency for cross-border receipts and payments, the world's second-most used currency for trade finance, and the third-most active currency in global payments. It also ranks third in weighting within the International Monetary Fund's Special Drawing Rights basket.

The PBOC added that the policies governing fund management associated with offshore listings as well as cash-pool management of multinational enterprises will be improved to facilitate cross-border trade and investment and better serve the real economy.

Also to facilitate trade and investment, the central bank vowed to expand the coverage of currency swap arrangements with major trading partners and make effective use of swap funds for more liquidity supply.