China is gearing up to allow more mainland enterprises to conduct cross-border trade settlement in yuan, and reinforce national currency cooperation with Russia, according to a senior official at the People's Bank of China (PBOC) on Friday.
"We will expand the list of enterprises authorized to settle cross-border trade in yuan to further promote the international float of the currency," said Jin Mei, deputy director-general of the currency policy division at the PBOC. At present the central bank allows about 60,000 domestic enterprises to conduct cross-border export settlement in the Chinese currency. "The process of expanding the yuan's global use must be gradual and in line with market demand, and with risks kept well under control," said Jin.
She made the remarks at a business promotion conference held in Beijing by Sberbank Rossii OAO, Russia's biggest commercial lender by assets.
Trade settlement in national currencies with Russia has huge growth potential, as settlement in yuan accounts for less than 5 percent of the total trading volume between the two sides, she said.
"Although at present the rouble is still the most-used currency for settlement conducted in national currencies between China and Russia, the settlement value in yuan is rising dramatically."
Jin said that the settlement value in yuan between the two countries rose more than eightfold to 1.7 billion yuan ($226 million) in the first ten months of the year, from the same period in 2010.
"Currently there is no barrier on cross-border trade settlement in yuan with Russia."
But the insufficient convertibility of the yuan, and the relatively small number of enterprises allowed to conduct trade settlement in the currency have resulted in a limited trade volume settled in national currencies with Russia, said Sergey Tsyplakov, trade representative of the Russian Federation in China.
"In addition, most enterprises on both sides are still not used to conducting settlement in the rouble and yuan," said Tsyplakov, adding that large fluctuations in the rouble have also made traders hesitant to hold the currency.
China and Russia have been calling for less reliance on the use of the dollar in international trade and investment since the global financial crisis in 2008. Both sides want an acceleration of moves to promote their own currencies on a global basis.
By the end of November, China had conducted cross-border trade settlement in yuan valued at 2.4 trillion yuan with 175 countries and regions, according to statistics from the PBOC. Hong Kong and Singapore contributed most of the settlements.
Tsyplakov said 2011 is a milestone for the bilateral relationship and the trade volume between the two economies is expected to reach $78 billion during the year. "In the first seven months, it increased by 44 percent year-on-year."
In June, the leaders of the two countries announced plans to increase the volume of bilateral trade to $100 billion by 2015 and $200 billion by 2020. "Cooperation between the two on national currencies could facilitate cross-border trade, and cooperation between financial institutions must also play an important role in this," said Tsyplakov.