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

The Shenzhen branch of the People's Bank of China said in a statement that companies in Qianhai, a financial pilot zone in Shenzhen, were permitted to get yuan loans from banks in Hong Kong.

The loan conditions and interest rates could be decided independently, it said.

"Cross-border yuan loan business is of great importance in terms of promoting Hong Kong's offshore yuan market and supporting Qianhai's development," the statement added.

The central bank branch, emphasized the move would enhance the scale of Hong Kong's yuan assets and improve liquidity in the offshore yuan market.

The Hong Kong Monetary Authority said in a statement that it welcomed the green light from PBOC as it would promote yuan circulation between Qianhai and Hong Kong, and bring more business opportunities for Hong Kong's banks.

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