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Forex deputy says yuan trade settlement trial to go ahead

China is to proceed with a trial of yuan settlement in overseas trade and improve foreign currency management, the deputy head of the foreign exchange regulator said in Shanghai yesterday.

"China will move on with the trial of using yuan in overseas trade settlement and relax the cross-border financing restrictions to shore up the support from forex management to the economy," said Deng Xianhong, deputy head of the State Foreign Exchange Administration. He didn't elaborate on the yuan settlement trial.

The State Council on Wednesday named Shanghai and four other cities in Guangdong Province to take part in the trial to settle overseas trade in yuan rather than United States dollars.

The trial is expected to help stabilize trade, trim exporters' currency exposure and build the yuan's position in the international monetary system.

The central government said in late December that it planned yuan settlement trials between the Yangtze River Delta and Guangdong and Hong Kong and Macau. A similar trial on yuan settlement between Yunnan Province and Guangxi Zhuang Autonomous Region and the members of the Association of Southeast Asian Nations is also planned.

Deng said the forex regulator will also improve trade services management as part of the package to boost economy.

China's exports were battered by shrinking external demand due to the financial crisis.

Expanding exporting services can help improve economic structure.

On Tuesday, the World Bank said the decline in China's economic growth may bottom out around the middle of the year.

But exporters have been hit hard and won't recover until conditions improved in the rest of the world. Deng said the current globally popular active fiscal policy and easing monetary policy would add to inflation and make the foreign exchange market more volatile.

He said the global economy had yet to bottom out and the real economy in the United States may deteriorate further.


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