Bank of China (Hong Kong) (BOCHK) is seeing a rapid increase in cross-border yuan trade settlements, BOCHK Assistant Chief Executive Zhu Yanlai said at a public seminar Thursday.

Zhu said cross-border trade settlements amounted to 55.2 billion yuan in the third quarter of the year. Since the pilot scheme for settlements was launched by the People's Bank of China (PBoC) in July 2009 the total has reached 75.7 billion yuan.

However, the decision to expand the scheme in June by enabling more companies in 20 mainland provinces to use the trade settlement system has reaped dividends. And BOCHK is also benefiting as it was appointed by the PBoC as the official clearing bank for the city's renminbi business.

According to Hong Kong Monetary Authority (HKMA) statistics, trade transactions settled through banks in Hong Kong amounted to 38 billion yuan in August alone, up substantially from a monthly average of 4.5 billion yuan in the first half of 2010.

The PBoC Shenzhen Central Sub-Branch Governor Zheng Jianjun said that since the launch of the pilot scheme, there have been 3,300 cross-border yuan trade transactions handled by the PBoC's Shenzhen branch. The 60 billion yuan it handled represents nearly 33 percent of the total.

Zheng said that the increase in business is down to the fact more local companies are becoming familiar with the process.

Zheng added that further growth is not out of the question if mainland authorities are able to relax controls over certain capital account items.

"If foreign corporations can use renminbi directly to pay for their foreign direct investment (FDI) on the mainland, it will bolster demand for more cross-border yuan trade settlements," Zheng said.

Norman Chan, chief executive of HKMA, shared a similar view to Zheng, noting that half of the FDI on the mainland comes from Hong Kong.

Mainland companies can also benefit as it would help them expand their businesses or make overseas investments, Chan added. He said that banks in Hong Kong handled some $35 billion of overseas investment by Chinese firms.

"The growth of the cross-border trade transactions can further strengthen the role of Hong Kong as an offshore yuan center," Chan said.

China Daily

(HK Edition 10/22/2010 page2)