Hong Kong banks have been providing personal yuan banking services since February 2004 and lenders such as Bank of East Asia, Standard Chartered and HSBC Holdings currently offer yuan deposit, exchange and remittance services.
"Approved by the State Council (cabinet), the People's Bank of China has decided to expand the scope of clearing arrangement for yuan business of Hong Kong banks," the central bank said in a statement posted on its Web site: www.pbc.gov.cn.
"The agreement of the State Council to expand renminbi business in Hong Kong helps strengthen Hong Kong's role as an international financial centre," Hong Kong Financial Secretary Henry Tang said in a later statement.
Under the new policy, Hong Kong residents who do not have yuan deposit accounts would be allowed to exchange up to 20,000 yuan ($2,473) per transaction at local banks, up from the current 6,000 yuan, the bank said. There would be no daily limit.
People with yuan deposit accounts will be able to exchange up to 20,000 yuan per day, unchanged from before.
Banks also would be allowed to provide yuan exchange services to Hong Kong businesses in the transport, telecommunications, medical care and eduction sectors, it said without elaborating.
Businesses with yuan bank accounts would be allowed to conduct one-way exchange of their yuan deposits into Hong Kong dollar, the central bank said.
Domestic banks would be allowed to raise the daily limit on remittances for each Hong Kong resident to 80,000 yuan from 50,000 yuan, the central bank said.
The Bank of China, the clearing bank, would allow Hong Kong residents to use yuan-denominated cheques for consumer spending in neighbouring Guangdong province within a daily limit of 80,000 yuan, it said.
The central bank would also abolish the credit limit of 100,000 yuan on yuan bank cards issued by Hong Kong lenders.
The new measures would take effect soon after finishing technical preparations, the bank said. It gave no further details
Hong Kong leader Donald Tsang first announced the proposed changes in his maiden policy address on October 12.
More individuals and companies are using yuan in the territory as its economy becomes increasingly integrated with that of mainland China, but China tightly controls the exchange of the yuan for foreign currencies.
Though Hong Kong returned to Chinese rule in 1997, the former British colony retained a high degree of autonomy, including an independent banking system.