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China extends cross-border trade settlement in yuan to entire nation

(Xinhua)

14:07, August 24, 2011

BEIJING, Aug. 23 (Xinhua) -- China announced on Tuesday that all parts of the country are able to use its national currency, the yuan or Renminbi, in cross-border trade settlements.

Previously, only 20 provincial regions in the country could conduct cross-border trade settlements in yuan.

The policy was announced by the People's Bank of China, the country's central bank, and five other financial authorities.

The extension is a crucial step in boosting cross-border use of yuan, which is stated in the country's 12th Five-year Plan (2011-2015), and will better serve enterprises' needs and further facilitate trade and investment, the central bank said in a statement on its website.

The move came after an announcement made by Vice Premier Li Keqiang last week that the government would extend cross-border trade settlement in yuan to the whole country.

Analysts said encouraging the use of yuan in cross-border trade settlements indicates China's ambitions of pushing forward the internationalization of the yuan.

The Chinese government first allowed trials of cross-border trade settlements in yuan in July 2009. It expanded the trial scheme to 20 provinces, municipalities and autonomous regions last year.

Overseas, the program was extended to all countries and regions after being piloted in Hong Kong, Macao, and ASEAN (Association of Southeast Asian Nations).

China's yuan settlement in cross-border trade surged to 957.57 billion yuan (149.62 billion U.S. dollars) in the first half of 2011, 13.3 times more than that for the same period of last year, according to statistics from the central bank.

To facilitate the yuan's internationalization, the government also plans to allow cross-border direct investment in yuan, according to the Ministry of Commerce.

Foreign investors will be able to make direct investments in China with yuan legally obtained overseas, according to a draft released by the ministry, which is currently soliciting public feedback on the new rules.

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