China's State Administration of Foreign Exchange (SAFE) announced on Wednesday that it will allow banks to set their own exchange rates for yuan against the US dollar with clients, [HK Corporate Registration]a further step in the liberalization of yuan exchange rates.

Banks can set their yuan/dollar exchange rate in their over-the-counter deals with clients on the basis of market demand, the SAFE said in a statement.

The regulation entered effect on Wednesday. Before the new move, the spreads in banks' yuan/dollar buying and selling prices were subject to regulatory controls.

The People's Bank of China [Hong Kong Company Formation, Incorporation, Business Registration]widened the spreads to 3 percent from the previous 2 percent in March.