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Yuan settlements for trade with HK to be offered soon

Banks could begin offering yuan-denominated settlement of trade deals between the Chinese mainland and Hong Kong soon, the People's Bank of China said yesterday.

"It won't be long before the policy can be made public," Zhou Xiaochuan, governor of the central bank, said during the annual meeting of the National People's Congress.

There were no technical obstacles for yuan settlements because commercial banks were already operating a multi-currency system, he said. Only some fine tuning was needed, he told reporters.

He said payment systems for mainland tourists using the yuan had operated since 2003.

Trade between Hong Kong and the mainland reached US$197.25 billion last year, up 18.7 percent from the year before.

Shanghai, Beijing, the provinces of Guangdong, Jiangsu and Zhejiang are among those with frequent trade with the special administrative region.

In December, China allowed yuan-based trade settlements between several areas on a trial basis, including trade between southern Guangdong, the Yangtze River Delta region and Hong Kong and Macau, and between the southwestern Guangxi Zhuang Autonomous Region, Yunnan Province and Southeast Asian nations. Such settlement would represent an important step for the yuan in international trade.

Zhou also said Hong Kong and the mainland hadn't tapped the currency pool of a currency swap agreement between the two sides.

The capital will be used in case of liquidity shortage to fight financial turmoil and there had been no urgent need to use the scheme so far, he said. On January 20, the two sides signed a three-year currency swap deal of 200 billion yuan (US$29 billion) to help stabilize Hong Kong's economy.


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