VisitCHN

China has taken another step towards internationalising its currency and reducing reliance on the US dollar with the announcement of new rules to allow select companies to invoice and settle trade transactions in renminbi.

The regulations released by the People’s Bank of China (PBoC), the country’s central bank, will allow approved companies to settle transactions through financial institutions in Shanghai and other cities in southern China.

Offshore, the trial scheme will allow transactions to be settled in renminbi in Hong Kong and Macao, the two self-governing territories on China’s southern borders, and later in a limited fashion in south-east Asia as well.

Importers and exporters will be able to place their orders with authorised Chinese companies, and settle payment for them, in renminbi.

Although it has no short-term implications for the full convertibility of the renminbi, the announcement provides ballast to the volley of political signals Beijing has been sending in recent months over its dissatisfaction with the US dollar.

“To many minds in China the US dollar’s time is almost up, the eurozone suffers from political paralysis and a too-conservative central bank, while two decades of economic stagnation and a shrinking population do the yen no favours,” said Stephen Green, of Standard Chartered, in Shanghai.

“For them, the renminbi is an obvious, and imminent, replacement.”

Far from being a replacement for the US dollar as a freely-traded reserve currency, the PBoC has justified the move initially by saying the new policy would provide stability for local exporters buffeted by the greenback’s fluctuating value.

Possibly Related Posts:

• China auto sales rebound to grow 56 percent in Aug
• Obama sanctions on North Korea are also aimed at China
• China requires ID to buy mobile phone numbers
• World stocks up on China, Australia economic news
• China imposes anti-subsidy duties on US chicken