Yuan for the road

The government's decision to promote greater use of the yuan to settle cross-border trade is a key but prudent step on the road to making the Chinese currency fully convertible.

After People's Bank of China (PBOC) issued detailed measures yesterday to regulate a pilot program for cross-border trade settlement, companies in Shanghai, Guangzhou, Shenzhen, Zhuhai and Dongguan can use the yuan to settle deals with Hong Kong, Macao and regional trade partners.

The move is also important because it will reduce foreign-exchange risks and transaction costs considerably for Chinese exporters, smarting from the impact of the worst global economic crisis in decades.