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August 25, 2009

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Home » Business » Economy

China looks to expand payment by yuan

CHINA'S mainland is considering expanding the cross-border trade yuan settlement trial to markets it has signed currency swap deals with, amid a rising transaction volume, a central bank official said yesterday.

"Our currency swap partners also hope that they can join the trial soon," said Li Bo, head of the legal affairs department of the People's Bank of China. "We are studying it."

The central bank has signed six currency swap deals worth 650 billion yuan (US$95.3 billion) with Hong Kong, Indonesia, South Korea, Malaysia, Belarus and Argentina.

In April, five mainland cities were picked to settle trade in yuan with businesses in Hong Kong, Macau and the 10-member Association of Southeast Asian Nations on a trial basis.

The first yuan settlement transaction on cross-border trade was made in Shanghai on July 6. Four Guangdong Province cities - Guangzhou, Dongguan, Shenzhen and Zhuhai - began the trial on July 7.

"Several provinces have applied to join the yuan settlement trial, besides Shanghai and Guangdong Province," said Li. "We will work with related parties to expand the trail at the proper time."

The central government has previously named Yunnan Province and Guangxi Zhuang Autonomous Region to join the trial but no timetable has been set yet.

The mainland is limiting the scale of the trial to ensure it runs smoothly. So far, the mainland has allowed about 400 companies to join the trial, and more than 20 companies have started settling their trade in yuan.

The trial allows mainland exporters to avoid foreign currency exposure by paying in yuan. Previously, they had to convert yuan into United States dollars or other currencies to settle international trade.


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