International role of Yuan rises

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The global financial crisis has led to doubts about the current international monetary system dominated by the US dollar. As China maintains a growth rate of around 8 percent, its currency has increasingly become a safe investment. Talks about the Yuan's Internationalization is gaining momentum, while the Chinese government seems confident to go with the trend.

Making the Yuan a convertible currency was first brought up in 1993. But boosting confidence and demand in the RMB will take time. The fact that China's economic growth has not stalled during the financial crisis, makes the Yuan an attractive choice. Since the end of 2008, China has signed currency swap deals with 6 countries and regions, totaling 600 billion yuan.

China is now taking steps to internationalize the yuan. It decided to use the RMB in cross-border trade settlements in 5 major cities in April. And in July, the Bank of Communications kicked off a trial run in Shanghai.

Ms. Wang, Staff Member of Shanghai Electric (Hong Kong) said "Before, we had to use foreign currency such as the US dollar for most trade settlements. So we had to bear the risks of volatile exchange rates. But now, using the RMB during payment is safer and more convenient."

Chen Wen, Department Manager of Bank of China (Hong Kong) said "10 ASEAN countries are included in the plan. As a clearance bank, we promote business in those countries. We hope trade between China and ASEAN members can be settled in RMB. We are quite confident it can happen."

4 cities in Guangdong province followed suit. Guangzhou, Shenzhen, Dongguan, and Zhuhai are located in the Pearl River Delta Region, boasting a GDP higher than Singapore. The Hong Kong Special Administrative Region also followed, and is the only location accepting trade settlements in RMB outside the Mainland. To ensure success, China simplified the export tax rebate process for those using the RMB in cross-border trade settlements.