Work underway on China-ASEAN yuan trade settlement agreement
Updated: 2011-10-22 14:22
NANNING -- China is working on an agreement with the Association of Southeast Asian Nations (ASEAN) to settle trade in yuan, an official with China's central bank said Saturday.
"It's currently underway," Jin Qi, assistant to the governor of the People's Bank of China, told Xinhua when asked to comment on recent reports that China and ASEAN will sign a yuan-denominated trade settlement agreement.
She made the brief remark on the sidelines of the third China-ASEAN Summit Forum on Financial Cooperation and Development held in Nanning, capital city of southwest China's Guangxi Zhuang autonomous region.
The framework agreement between China and ASEAN, which is likely to be signed late this year or early next year, will pave the way for banks in China and ASEAN countries to start exchanging yuan for ASEAN currencies, according to a Reuters report released Thursday quoting anonymous sources.
Analysts said a China-ASEAN agreement on settling trade in yuan would benefit the region, largely due to the stability of the yuan, or Renminbi.
Once signed, such an agreement would greatly boost China-ASEAN trade, investment and other aspects of economic cooperation, Bank of Communications chief economist Lian Ping told Xinhua on the sidelines at the forum.
"The US dollar has been the dominant currency in payment and settlement in this region but will certainly become volatile in future," said Lian. "If a stable currency like Renminbi can play a bigger role in the region, it will be good for both trade and regional financial stability."
The yuan has appreciated by more than 30 percent against the US dollar since July 2005 when the country scrapped the yuan's peg to the greenback and adopted a managed-floating currency system, according to a central bank report released earlier this month.
China has pledged to increase the yuan's flexibility, while stressing that exchange rate policy will be reformed in a gradual and controlled manner and the currency's basic stability will be maintained.
The government has pushed for the internationalization of the yuan by encouraging the use of the currency in cross-border trade and investment settlement.
In her speech at Saturday's forum, Jin urged advancing bilateral yuan-denominated settlement between China and ASEAN and providing conveniences for regional trade and investment.
"We should speed up the work of signing and improving bilateral agreements on local currency-denominated settlement," she said.
She also called for active efforts to allow trading between yuan and ASEAN countries' currencies on inter-bank foreign exchange markets in China and ASEAN member countries.
China and ASEAN have seen stable growth in cross-border trade settlement in yuan, said Jin, who noted that there are now more than 30 banking institutions set up by ASEAN in China while Chinese-funded financial institutions have 11 branches in ASEAN countries.
The Chinese government first allowed trials of cross-border trade settlement in yuan in some cities in July 2009. Hong Kong, Macao and ASEAN were the first overseas pilot regions.
The trial scheme has now been extended to all parts of China and all countries and regions overseas.
China's yuan settlement in cross-border trade surged to 957.57 billion yuan ($149.62 billion) in the first half of 2011, 13.3 times more than that for the same period of last year, according to statistics from the central bank.
The forum was held along with the six-day eighth China-ASEAN Expo that opened in Nanning on Friday.