China is drafting rules to allow overseas companies to invest in yuan on the Chinese mainland as part of efforts to boost the currency's global footing, a central bank official said yesterday in Shanghai.

A small number of companies are participating in a limited trial to allow yuan-backed foreign direct investment in China and regulations on the trial are being drafted, Li Bo, director-general of Monetary Policy Department II of the People's Bank of China, told a discussion in the run-up to the Lujiazui Forum, which opened yesterday.

Companies want to repatriate the yuan that has been accumulated in overseas markets back to the mainland as they seek more investment channels for their money. The demand is increasing as more yuan are circulating overseas amid growing popularity of using the yuan in the trade settlement program.

In mid-2009, China relaxed restrictions on the use of the yuan for cross-border trade under a trial, which was initially limited to Shanghai and four cities in Guangdong Province. The catalyst came in June 2010 when the program was expanded to 20 provinces and municipalities across the nation.

Li told Shanghai Daily that China will expand the scheme nationwide this year.

"We are expecting to receive applications from all the remaining provinces within one to two months to start the program," Li said. "Hopefully, we will promote the program nationwide within this year."

Li said he expects the rapid growth of the yuan settlement to continue.

"It's a market choice, rather than a government drive," he said.

The number of mainland companies authorized to settle trade accounts in yuan rose from 365 at the start of the program in 2009 to more than 67,000 so far.

The cross-border trade settlement hit 530 billion yuan (US$82 billion) in the first four months of this year, more than for the whole of 2010.