BEIJING - Trade between the Shanghai and Hong Kong bourses will be settled in the yuan, said the Chinese mainland security regulator on Friday.

This will be different from the current Qualified Foreign Institutional Investors (QFII) mechanism, which allows investment in overseas currencies, said Zhang Xiaojun, spokesman of China Securities Regulatory Commission (CSRC).

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The pilot program will not affect QFII and other mechanisms including the Qualified Foreign Institutional Investor (QDII) and the RMB Qualified Foreign Institutional Investor's (RQFII), but will supplement them and provide more choices for overseas capital, Zhang said.

QFII, QDII and RQFII mechanisms allow overseas investors to buy stocks and bonds on the Chinese mainland.

The pilot program is designed to promote the internationalization of the yuan and development of Hong Kong as an offshore yuan business center, said a joint statement by the CSRC and the Hong Kong Securities and Futures Commission on Thursday.

During the pilot, investors in Hong Kong will be allowed to buy up to 13 billion yuan a day in mainland shares, with a ceiling of 300 billion yuan. Mainland investors will be allowed to buy up to 10.5 billion yuan a day in Hong Kong, with a limit at 250 billion yuan.

The pilot program will only involve dual-listed stocks and designated stocks in the two bourses. Investors in the mainland will have to be institutional investors or individual investor with 500,000 yuan in the account.