HK hopes yuan trade settlement can start in July

The mainland and the SAR have agreed to use the Chinese yuan to settle bilateral trade. The first deal is expected as early as July.

The cities of Guangzhou, Shenzhen, Zhuhai and Dongguan in Guangdong province, neighboring Hong Kong, as well as Shanghai, will start the trial. The scheme should cut foreign exchange costs for exporters and importers in those areas. At present, they must settle trade in Hong Kong dollars or US dollars because the yuan is not fully convertible.

Zhou Xiaochuan, Governor of People's Bank of China, said, "The memorandum was ratified by the State Council to further expand yuan business. Meanwhile, it will push forward the trade relations between the mainland and Hong Kong, and financial cooperative relations."

The Chief executive of the Hong Kong SAR Monetary Authority says the program will take effect in July , at the earliest.

Joseph Yam, Chief executive of Hong Kong Monetary Authority, said, "We hope the first deal can be done in July. It's an important step for the SAR. Once yuan settlement becomes a reality, we can expect banks to further extend yuan credit to enterprises."

Hong Kong SAR chief executive Donald Tsang says this is a breakthrough which can increase enterprises' dexterity and create more business opportunities for Hong Kong's banks.

Donald Tsang, Hong Kong SAR Chief Executive, said, "The yuan trade settlement scheme is now in full preparation. The plan allows Hong Kong enterprises to settle trade in yuan with five trial cities' enterprises. Hong Kong's banks are authorized to provide relevant services. Detailed operation methods will be released to public as soon as the mainland announces management rules."

The scheme is believed to expand HK's role as an offshore center for trade in the Chinese Yuan and test the ground for the currency's gradual liberalization. China is also looking at allowing yuan trade settlement with other trading partners.