This is a significant step by China to open up its capital accounts. China allowed renminbi (RMB) convertibility on trade accounts nearly two decades ago, but almost all capital account transactions in China are under varying degrees of control, state-run Xinhua news agency reported.
The move also came less than two weeks after the RMB was admitted by the International Monetary Fund into its Special Drawing Rights basket alongside the dollar, euro, pound sterling and yen on November 30.
For each domestic institution outside of the negative list, the cap was set separately for both the cross-border revenue and the expenditure on yearly basis, the People's Bank of China said in guidelines issued here.
The guidelines encourage banks in the FTZs to deal with transactions between RMB and foreign exchange derivatives.
Cross-border RMB investment funds are welcomed in Fujian FTZ, while cross-border RMB transactions between non-banking financial institutions and the Hong Kong and Macao regions are permitted in Guangdong FTZ.
The guidelines also support institutional investors in Hong Kong and Macao to launch qualified domestic limited partnerships (QDLP) in Guangdong FTZ, raising RMB capital in the zone to invest in the Hong Kong capital market.