Source: CCTV.com

04-09-2009 18:59

China has taken an important step in expanding the use of its currency globally. The State Council has named five key manufacturing cities that can use the yuan in overseas trade settlements in a trial program.

The State Council has named five key manufacturing cities that can use the yuan in overseas trade  settlements in a trial program.

The move will help Chinese foreign trade enterprises reduce the risk from exchange rate fluctuations and perhaps give an impetus to declining overseas trade.

The five cities spearheading the planned yuan-settlement program are Shanghai, Guangzhou, Shenzhen, Zhuhai and Dongguan. All have large numbers of export-focused factories.

China's exporting companies see the move as a boost to the country's foreign trade, which has been on a continuous decline amid the global financial crisis. Experts explain why using yuan as the settlement currency will be an impetus for China's foreign trade.

China now uses the US 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.

The Chinese government has been promoting the use of the yuan in overseas trade and in the past four months has signed 650 billion yuan worth of swap agreements with several trading partners. Experts say the yuan settlement will also lead to increased internationalization and status for China's currency.

Tang Yaling, researcher of Bank of China, said, "The Chinese yuan will be progressively become more convertible, and more widely accepted in foreign trade, depending on how the reform develops. The trial program will lay a good foundation of the internalization of Chinese currency in global system in the future."

The technical details of the trial program, including when it will kick off, are still to be disclosed. The State Council has urged the relevant departments to issue management rules as soon as possible and maintain a stable progress in trial work.

 

Editor:Liu Fang