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China to expand yuan scheme

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1 China to expand yuan scheme on Sat Mar 13, 2010 2:45 pm

littlekracker


BEIJING: China will expand
a trial scheme allowing some
firms to settle trade deals in
the yuan currency, as busi-
nesses seek to control
exchange rate risks, an official
newspaper reported yesterday.
Beijing launched the pilot
programme last year allowing
selected regions and countries
to pay for imports and exports
in yuan, a move heralded as a
step towaards relaxing con-
trols and eventually interna-
tionalising the Chinese cur-
rency.
China said the scheme
would initially be limited to
certain areas, including Hong
Kong and Macau, outside
mainland China, and to select-
ed firms in Shanghai and
China’ s main export province,
Guangdong, in the far south.
The Southern Daily, the
official newspaper of
Guangdong, has now reported
that some of those limits will
be eased in an effort to con-
solidate the scheme.
“ Recently, the relevant gov-
ernment authorities have
agreed to no longer restrict the
areas outside (mainland) bor-
ders that may engage in cross-
border trade settlement in
Renminbi,” said the report,
citing a recent meeting of
Guangdong officials.
The Renminbi, or RMB, is another
name for the yuan.
“ Firms qualified to engage in trade in
the trial areas can all engage in Renminbi
trade settlement for imports,” the report
added.
The report did not mention exports as
part of that relaxation. Nor did it say
explicitly whether the relaxed rules
applied to Shanghai.
The reported consolidation of the trial
programme comes while Chinese offi-
cials and companies are grappling with
pressure, especially from the US and the
European Union, to let the yuan rise in
value to relieve their own exporters and
so reduce their big trade deficits with
China.
The report did not directly link the
yuan settlement move to those pressures.
But Zheng Jianrong, a deputy head of the
Guangdong trade office, told the newspa-
per the rules would help trading firms
cope with foreign exchange rate worries.
“ Using the Renminbi as the currency
for settlement helps domestic firms avoid
exchange rate risks, and helps to reduce
their foreign exchange transaction costs,”
said Zheng.
Under the programme, Chinese import-
ers and exporters in selected areas can
apply for the right to sign agreements
with banks to use yuan to settle trade
deals. Chinese banks in these areas then
arrange contracts with banks outside the
mainland to support the off-
shore yuan settlements.
“ The trial firms will no lon-
ger be restricted geographical-
ly,” said Luo Bochuan, a
Chinese central bank official
based in Guangzhou, capital of
Guangdong.
“ As long as the firm in the
partner country is willing, we
will actively support trade
firms using the Renminbi for
cross-border settlements.”





this is a pdf ( Gulf Daily News Monday, 1st March 2010) here's the link http://www.gulf-daily-news.com/source/XXXII/346/pdf/PAGE30.pdf

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