BEIJING, April 9 -- Five major trading cities
have got the nod from the central government to use the yuan in overseas trade
settlement - seen as one more step in China's recent moves to expand the use of
its currency globally.
Shanghai and four cities in the Pearl River Delta -
Guangzhou, Shenzhen, Dongguan and Zhuhai - have been designated for the purpose,
said a State Council meeting chaired by Premier Wen Jiabao yesterday. The Pearl
River Delta boasts the country's largest cluster of export-oriented
manufacturing operations.
The move is aimed at reducing the risk from exchange
rate fluctuations and giving impetus to declining overseas trade, according to a
statement posted on the government website.
Analysts said the experimental use of the yuan in
trade settlement also reflects policymakers' rising concern over the shaky
prospects of the US currency, of which China has large reserves from previous
trade growth, and their willingness to gradually expand the yuan's use globally.
"The trial is the latest move toward making the yuan
an international currency," Huang Weiping, professor of economics at Renmin
University of China, said. "The prospect of a weaker US dollar is making the
transition more imperative for China."
The mainland is trying to promote the use of the yuan
among trade partners and, in the past four months, has signed 650 billion yuan
(95 billion U.S. dollars) worth of swap agreements with Argentina, Indonesia,
South Korea, Malaysia, Belarus and the Hong Kong Special Administrative Region.
The agreements allow them to use their yuan reserves to directly trade with the
Chinese mainland within a set limit in volume.
Stephen Green, head of China Research of Standard
Chartered Bank, said the swap deals would help encourage the use of the yuan as
the currency of choice for international trade.
"In the longer term, if countries around the region
and beyond start pricing their trade in yuan, this will also lead to increased
internationalization and status for China's currency," Green said.
China now uses the U.S. dollar to settle most of its
international trade but the drastic swings in the greenback have become a risk
for Chinese exporters in recent years.
Dong Xian'an, economist with China Southwest
Securities, said: "For many exporters, the dollar's fluctuation is a serious
concern. The ability to settle trade in the yuan would reduce such risk," he
said.
Chen Xianbin, chairman of Guangxi Sanhuan Enterprise
Group, told China Daily that his company lost more than 150 million yuan in the
past three years from international trade due to the exchange rate changes
between the yuan and the greenback. Chen's company, a ceramic tableware
exporter, relies on Southeast Asian markets for 15 percent of total sales.
China's foreign trade has been on a continuous
decline amid the current global financial crisis. Exports plunged 25.7 percent
year on year in February, one of the sharpest falls ever, while imports dived
24.1 percent.
Analysts said the US Federal Reserve's decision to
buy long-term Treasuries, which means printing new money, may also lead to a
depreciation of the U.S. dollar. That is also one reason for China to reduce the
use of the dollar in trade so that the value of its 1.95 trillion U.S. dollars
foreign exchange reserves does not depreciate.
Zhou Xiaochuan, the central bank governor, said last
month that in the long run, it may be ideal to replace the dollar with a new
international reserve currency under the mechanism of the International Monetary
Fund.
(Source: chinadaily.com.cn)
Yuan's role presents dilemma for
Chinese policymakers
BEIJING, April 8 (Xinhua) -- While China's proposal
for a super-reserve currency did not make tangible progress at the G20 summit,
it wasn't meant to. Instead, it did what it was intended to do: allow China --
the largest holder of U.S. debt -- to voice unease about U.S. monetary policy.
At the G20 meeting, Chinese President Hu Jintao
called for enhanced supervision over major reserve-currency issuing economies
and an overhaul of the international monetary system. Full story
China to make breakthrough in
yuan-based cross-border payment
BEIJING, April 6 (Xinhua) -- China would
manage to make breakthrough in yuan-based cross-border payment system in 2009,
People's Bank of China, or the central bank, said in an on-line report.
According to the report reviewing the country's
payment system in 2008, China would further develop regional and international
cooperation in payments, and improve the yuan-based cross-border trade
settlements this year. Full
story
