CRI听力:Cross-border Yuan Settlement Expansion to Hedge against Forex Volatility

China has increased almost 200-fold the number of companies that can settle trade in yuan. Experts say the move is part of the country's effort to internationalize Renminbi and reduce the dollars' dominance in its trade sector.

Zheng Chenguang reports.

The People's Bank of China, China's central bank, has drastically expanded the cross-border yuan settlement trial program for Chinese companies. It now includes more than 67,000 companies in 20 regions, up from 365.

The country launched a pilot scheme in 2009 that was open to companies in only five Chinese cities, such as Shanghai and Guangzhou.

Robert Minikin, a senior foreign exchange strategist at Standard Chartered in Hong Kong, offers his reading.

"We see this is an extremely important step. It clearly underlines the authorities' wish to make RMB potent in trade settlement and use it as a substitute for the U.S. dollar."

Traditionally, Chinese companies have received payment for their goods in U.S. dollars, which must be converted into yuan through official government channels.

Yi Xianrong, a senior finance researcher with the Chinese Academy of Social Sciences, says the expansion of the scheme helps keep the volatility of the U.S. dollar at bay.

"The U.S. dollar is depreciating against other currencies in the world. If domestic enterprises can settle trade in yuan, they can avoid risks posed by the volatile foreign exchange market. Also, RMB settlement simplifies process for businesses and reduces trade costs as well."

Statistics from the People's Bank of China show that trade transactions settled in Chinese yuan reached 340 billion yuan, or 51 billion U.S. dollars, between June and November, more than seven times the total level at its initial stage.

Robert Minikin believes the scheme's prospects bode well.

"We believe that this growth can be extended going forward. It's important to know that RMB has a very small role at the moment in both trade settlement and also more generally in global asset trading. So we see it as having huge growth potential in this market given China's role in global economy and global trade."

Based on data provided by Standard Chartered and the People's Bank of China, an estimated 200 billion yuan in Chinese imports will be settled in yuan in 2011, which will increase to 2.8 trillion yuan by 2015.

For CRI, I'm Zheng Chenguang.