Chinese authorities have issued an approval for the launch of pilot programs of RMB qualified foreign institutional investors in a move that strengthens the country's bid to make the Renminbi an international currency.

In a joint statement released by the China Securities Regulatory Commission, the People's Bank of China and the State Administration of Foreign Exchange, Hong Kong subsidiaries of fund management and securities firms can use RMB funds raised in Hong Kong to invest in Mainland securities according to a pre-set quota of around RMB20 billion ($3.15 billion) for pilot programs. 

To rein in possible risk, qualified investors should invest a minimum of 80 per cent of the RMB funds in fixed-income securities, while the investment into stock and equity funds should not exceed 20 per cent. The possibility of the extending the trial program shall be determined by the departments involved after the launch. 

Over the last few years, the government has encouraged the use of the RMB in cross-border trade and investment, as well as allowed foreign direct investment in overseas RMB funds, in an attempt to increase the amount of money that flows back into the country. In a recent study by HSBC China, the bank forecast that over half of China's trades with emerging markets will be settled in RMB by the year 2015. To date, money market funds account of 5 per cent China's fund activity.