China determined to expand yuan trading abroad

10:10, January 13, 2011      

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A Chinese bank says its New York City branch has begun offering accounts denominated in yuan in a new move to expand the currency's global reach.

Beijing is trying to reduce reliance on the U.S. dollar by promoting the yuan, for trade and finance. It is promoting Hong Kong as an offshore market for foreigners to conduct yuan business separate from the mainland.

Hong Kong banks began handling yuan transactions with the mainland last year and the World Bank and some foreign companies have sold yuan bonds.

Bank of China Ltd. says customers of its Chinatown branch in New York will be allowed to trade yuan for dollars and can wire yuan to or from China.

In a statement on its website, the bank said account holders can exchange up to the yuan equivalent of $4,000 per day, with a limit of $20,000 per year, while the limits are half those levels for non-account customers.

"They are trying to expand the scope of people who can hold yuan and that increases demand," The Associated Press quoted Daniel Hui, a foreign exchange strategist for HSBC Corp in Hong Kong, as saying.

Still, Hui said Chinese restrictions on money flows into and out of the mainland mean foreign customers who want to trade yuan will be limited to the Hong Kong market.

China is the world's biggest exporter and the second-largest economy behind the United States but its exporters receive mostly U.S. dollars for their goods. Being paid in yuan would help them eliminate uncertainty about exchange rate changes. It also might help to promote China as the center of an Asian regional trading area.

China's leaders have said they will eventually let the yuan trade freely but say relaxing controls too abruptly would damage its financial system.

Beijing promised more exchange rate flexibility in June and the currency has risen by about 3.5 percent against the dollar since then. Analysts expect another 5 percent gain this year.

Economists say the process of making the yuan an international currency on the level of the U.S. dollar, euro or yen will take years and depend on factors such as how many foreign companies want to use it.

China's central bank governor, Zhou Xiao-chuan, called in 2009 for a new global currency managed by the International Monetary Fund to replace the dollar for trade and storing reserves. Economists say such a change is unlikely, but the comments reflected Beijing's unease about the dollar, which it uses for the bulk of its trade and to store an estimated one-half of its $2.85 trillion in reserves.

Agencies / People's Daily Online


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