Thursday, August 25, 2011

China to allow yuan trade settlement nationwide and direct foreign investment in the yuan

Source: NHK World
Date: Wednesday, August 24, 2011 11:10 +0900 (JST)

[Editor's Note: Of particular interest in the following video is that China will start allowing direct outside investment in its yuan currency in addition to facilitating international trade in the yuan. This development is part of a trend in which countries have shown a preference for transacting in their own currencies rather than the U.S. dollar, which is still the world's reserve currency (although perhaps for not much longer).]

China is expanding the use of its currency in settling cross-border trade. It will now allow businesses nationwide to settle exports and imports with the yuan.

On Tuesday, the People's Bank of China, the country's central bank, said permission for yuan-based trade settlement will now be given to all parts of the country.

This means Chinese companies, as well as trading firms overseas, can use the yuan for cross-border settlement to rein in currency risks.

Originally, in 2009, China permitted companies in just 5 cities, including Shanghai, to use the yuan for trade with Southeast Asian nations.

The government later expanded the use of its national currency for trade to 20 provincial regions and all international transactions.

China's Commerce Ministry said it will also start allowing foreign direct investment in yuan.

China is aiming to boost the status of the yuan as an international currency, amid weakening trust in the US dollar.