The plan has now been submitted to the State Council, China's cabinet, for final approval, the official Shanghai Securities News quoted Wang Jingwu, president of the Guangzhou branch of the People's Bank of China, as saying at the Guangdong province Financial Work Meeting on Monday.

Guangzhou and Shenzhen will be the site of the new Qualified Domestic Individual Investor program, known as QDII2 because it follows on China's original program for outward financial investment, the Qualified Domestic Institutional Investor (QDII) program.

The program could launch as early as July, the paper quoted unnamed industry sources as saying.

China's currency is convertible for trade and other current account transactions, but is tightly controlled for capital account transactions, especially financial investment.

China launched the original QDII in 2007, allowing local financial institutions to invest in overseas capital markets. China had granted $85.6 billion in QDII quotas by the end of 2012.

In early May, the State Council called for the drafting of a detailed plans to achieve full yuan convertibility and specifically mentioned a program for individual outward investment, but did not offer a timeline.

The selection of Guangzhou and Shenzhen for the pilot are part of the Pearl River Delta Financial Reform Experimentation Zone, the paper also reported.

Economists say capital account convertibility could contribute to improved capital allocation in China by forcing Chinese banks to compete for investor funds and giving Chinese domestic savers more investment options, but it also raises the risks of destabilising capital flows.

Separately, Wang also said that China's State Administration of Foreign Exchange had chosen Guangdong as a site for a pilot project allowing multi-national companies to centrally manage their foreign exchange transactions, allowing them greater flexibility in cash management, currency conversion, and cross-border transactions.

Midea Group Co  (>> GD Midea Holding Co Ltd), TCL Corp (>> TCL Corporation) and Flextronics International Ltd (>> Flextronics International Ltd.) have been picked to join the pilot project.

Similar corporate forex management programs are already under way as part of a broader campaign to loosen currency controls and promote greater international use of the yuan.

(Reporting by Gabriel Wildau; Editing by Kim Coghill)