The quota of allowable yuan loans flowing from Hong Kong to Qianhai could reach up to 50 billion yuan, Caijing magazine reported on Dec 31, citing an anonymous source.

Qianhai is a financial pilot zone near Hong Kong. On Dec 27 China formally allowed companies in the area to borrow yuan from Hong Kong lenders, as it tries to further open up its capital account and promote the use of the national currency around the world.

First batch of pilot loans would range from 30 to 40 billion yuan, despite an upper limit of 50 billion yuan, it reported. "Like Qualified Foreign Institutional Investors and the renminbi QFII, the quota might be further expanded in accordance with the market demand."

As of Dec 21, yuan deposits in Hong Kong reached 550 billion yuan. The source, close to regulators, said the quota for such yuan loans would be maintained below 10 percent of those deposits.

The Shenzhen branch of the People's Bank of China said in a statement that the conditions and interest rates for the loans could be decided independently.

It emphasized the move would enhance the scale of Hong Kong’s yuan assets and improve liquidity in the offshore yuan market.