Source: CCTV.com

04-16-2009 09:30

Cross-border renminbi settlement allows domestic foreign trade companies to settle the balance with yuan when trading with overseas companies. BizChina's reporter explains what impact the new settlement will bring to the country's foreign trade sector.

Cross-border renminbi settlement allows domestic  foreign trade companies to settle the balance with  yuan when trading with overseas companies.

Since the outbreak of the global financial crisis, the exchange rate of the US dollar and Euro have fluctuated acutely. These are the most important settlement currencies for world trade. In international trade, the collection of payment always comes after shipping, so one single acute fluctuation will greatly affect the profit of domestic trade companies.

Chen Qi, Head of a company in Shanghai said "The exchange rate between US dollars and Renminbi was 1 versus 7 when we signed the deal. But the rate lowered to 1 versus 6.48 when we balanced. And that led to a direct loss for our company."

China's foreign trade volume ranked the world's number three last year, following the US and Germany. Experts believe that the new Renminbi settlement will help foreign trade companies to avoid risk relating to exchange rate fluctuation. And it will help stabilize trade demand.