Shanghai: China’s foreign exchange regulator granted a foreign fund management company a quota of more than $1 billion on inbound portfolio investment for the first time on Thursday, in a move towards increasing international use of the yuan currency.

Hitherto, only foreign central banks, monetary authorities and sovereign wealth funds had been allowed quotas in excess of $1 billion under China’s Qualified Foreign Institutional Investor (QFII) scheme.

The measure is unlikely to have a major impact on foreign funds, who are only using around half of their total programme quota, as they harbour other reservations, notably over taxation policy, exchange rate volatility, and operational concerns.

But it marks a small step towards making the yuan fully convertible, and could support Beijing’s push for the yuan to be included in the basket of currencies used for Special Drawing Rights (SDR), the International Monetary Fund’s reserve asset.

The State Administration of Foreign Exchange (SAFE) signalled the shift in policy on its website, with an announcement that it had granted Fidelity Investments Management (Hong Kong) Ltd a combined investment quota of $1.2 billion to buy Chinese stocks and bonds.

The move also came a day after sources told Reuters that China was easing restrictions on foreign participation in China’s massive interbank market, which would provide more investment options and reduced paperwork, without changing the total amount of foreign money allowed into the $5 trillion market.

Seeking more clout internationally, China has openly lobbied for the yuan to be included in the SDR basket, which the IMF will review later this year. The basket is currently limited to dollars, euros, pounds and yen.

The yuan was previously rejected due to restrictions on capital investment flows that made it difficult for anyone outside China to hold, trade, or invest with the currency.

While there was no official announcement that the investment cap for foreign fund managers was being eliminated, a SAFE official said such an announcement could be imminent.

“We are considering reforming the QFII system,” Guo Song, a senior official at the State Administration of Foreign Exchange, said at a press conference on Thursday morning.

“For example, we are considering lifting the $1 billion (per fund) quota limit. You may see this in one or two days,” he said, adding that the regulator was also mulling “making it easier for capital to flow in and out.” Guo did not say whether or when SAFE might lift the overall QFII programme quota, which currently stands at $150 billion.

Analysts said the precedent set by Fidelity’s increased investment limit would probably herald further relaxation.

“I believe this is a strong statement made by the regulators they will continue with rapid liberalisation of the cross border platforms on all fronts,” said Charles Salvador, analyst at Shanghai-based fund consultancy Z-Ben Advisors.

Fidelity Investment Management did not immediately respond to requests for comment. SAFE could not be reached for comment.