Some foreign companies in China can now use their registered capital to buy stakes in Chinese companies as part of an experiment to further loosen capital controls, [Hong Kong Company Formation, Incorporation, Business Registration]the State Administration of Foreign Exchange said on Monday.

The agency said the pilot test would also reduce red tape for companies that want to convert their registered capital into yuan to attract more foreign investment.

Under the new rules, companies are free to convert all of their registered capital into yuan if they wish, though they are prohibited from using the funds to buy listed Chinese securities.

Previously, the amount of registered capital that companies could convert into yuan was limited by the size of their actual transactions. The use of the funds was also strictly controlled by authorities.

The experiment, [Hong Kong Company Formation & Registration]which began on Monday, will run in 15 provinces and regions that include Beijing, Shenzhen in Guangdong province and Guizhou province in southwestern China.