China's central bank has issued a framework supporting domestic banks in cross-border RMB interbank financing with overseas institutions, aiming to enhance offshore RMB liquidity, promote cross-border RMB usage, and strengthen risk-managed capital flow.

The People's Bank of China (PBOC) clarified that cross-border RMB interbank financing covers borrowing and lending between domestic and foreign financial institutions, including account financing, bond repos, and other arrangements involving real claims and liabilities. The framework excludes domestic banks' purchases of foreign interbank certificates of deposit or bonds.

Eligible domestic banks include Chinese-funded, wholly foreign-owned, and joint-venture banks, as well as foreign bank branches in China. Overseas counterparties include central banks, commercial banks, insurance companies, securities firms, fund managers, and long-term institutional investors such as sovereign wealth and pension funds.

Risk-Managed Lending Limits: Net RMB lending to overseas institutions is capped based on capital levels and funding capacity, with thresholds designed for macroprudential stability. Banks must set up internal monitoring systems, with alerts at 80% of the cap.

Countercyclical Flexibility: The PBOC can adjust lending parameters based on offshore RMB liquidity and cross-border capital flow trends.

Exemptions for Trade-Related Flows: RMB cross-border lending tied to genuine trade financing, indirect loans to overseas enterprises, and transactions via RMB clearing banks are excluded from net lending limits.

Governance & Reporting: Banks must report monthly activity through the RMB Cross-Border Payment Information Management System (RCPMIS). The PBOC will monitor compliance both on-site and off-site.

The framework gives domestic banks clearer, more flexible access to offshore RMB markets. By consolidating limits into a net lending cap, banks can optimize multiple interbank and trade-related transactions without overlapping restrictions.

For market participants, this offers an opportunity to leverage RMB liquidity offshore, support cross-border investment, and reduce reliance on third currencies for trade settlement. Cross-border interbank financing under these rules will play a central role in facilitating RMB-denominated transactions, providing liquidity, and supporting China's broader trade and investment flows.