GUANGZHOU, Nov. 6 (Xinhua) -- All businessman Liu Dingjun wants for Christmas is a Chinese currency-denominated trade settlement service for his exports.

    Liu is general manager of Liaoning Tonghui Import and Export LLC, which has exported Christmas gifts for more than a decade from Dalian city, northeast China's Liaoning Province.

    He told Xinhua Friday that though the U.S. dollar's continuing decline made him anxious, it was not yet feasible for his company to resort to the yuan, or Renminbi, for a better alternative.

    China's foreign trade sector has long made deals in the U.S. dollar. In early July, China launched a pilot program of cross-border trade settlement in the yuan in some mainland cities, including Shanghai, Guangzhou, Shenzhen, Zhuhai and Dongguan, for trade with Hong Kong, Macao and some regional trading partners.

    "We hope our clients from Europe and the United States will choose the Renminbi to settle with us. Only a short period of time has passed since the pilot program was launched. Now the biggest step forward to the yuan's acceptance in the outside world is that all of our clients know there is a trade settlement service in yuan," said Liu.

    "However, many difficulties and barriers must be overcome before overseas traders are aware that yuan-denominated settlement is not only workable, but also necessary and beneficial for both trading sides."

    The major barrier lay in the weakness of Chinese exporters when discussing trade conditions, since usually they cannot provide unique products with a competitive edge, he said.

    Lan Sihong, a shareholder in Guangzhou Yinling Arts and Crafts Co., Ltd. based in the capital of Guangdong province, said the market-access threshold was low for exports such as Christmas goods, toys and building materials. This resulted in increasingly fiercer competition, which made export prices lower and gave Chinese traders a disadvantage when they timidly tried to ask for settlement in yuan as an "extra requirement".

    She believed that as far as sales were concerned, internationalization of the Renminbi hinged on the speed of industrial upgrading.

    OTHER BARRIERS

    Central bank data shows that from July to mid September, the volume of yuan-denominated cross-border trade totaled 70 million yuan (10.26 million U.S. dollars), a tiny fraction of China's massive annual export volume of more than 1 trillion U.S. dollars.

    Xu Nuojin, deputy president of the People's Bank of China Guangdong Province branch, said the pilot yuan-denominated settlement services was launched against the backdrop of the global economic downturn, when traders were more vulnerable to risk in foreign exchange rates.

    Xu reckoned that if a Chinese company settled its external trade in yuan, it would be able to cut trade costs by 3 to 5 percent.

    Corporate participants in the pilot program mainly came from electrical appliance and telecommunication equipment manufacturing sector, as well as retail and wholesale and agriculture sectors, said Xu.

    However, a Malaysian importer said under condition of anonymity that his company wanted to buy small home electrical appliances from China and sell back palm oil. He had considered trade settlement in the Renminbi before he decided to abandon the idea, since it was inconvenient that only a few cities could provide the service.

    Xu attributed the limitations to the yuan's inconvertibility in capital accounts.

    Liu Dingjun said that despite the fact that the concept of yuan-denominated trade settlement was well known, Renminbi reserves at hand were too few for purchasers from most nations and regions.

    Li Xiaoni, deputy head of the China Chamber of Commerce of Metals, Minerals and Chemicals Importers and Exporters, called for expansion of the pilot program and supporting policies.

    A similar arrangement has been proposed for exporters in Guangxi Zhuang Autonomous Region and Yunnan Province in south China, which will be allowed to use the yuan to settle cargo trade with ASEAN (Association of Southeast Asian Nations) members starting this year. Details of that program are yet to be disclosed.

    China has also been arranging currency swaps with trading partners to bypass the U.S. dollar in trade settlements. Since mid-December, the mainland has signed currency swap contracts worth 650 billion yuan (95.6 billion U.S. dollars) with central banks in the Republic of Korea, Malaysia, Belarus, Indonesia and Argentina and the monetary authorities of Hong Kong.

    These swap accords allow other overseas central banks to sell yuan to local importers who want to buy Chinese goods.