China settles record amount of its trade in yuan

September 04, 2013

By KEIKO YOSHIOKA/ Senior Staff Writer

China's renminbi is increasingly being used for trade settlement, statistics from the country's central bank show.

The transactions could eventually have a major impact on the global economy.

The amount of trade paid for in renminbi reached 2.05 trillion yuan (33 trillion yen, or $334.9 billion) between January and June, up 64 percent from the same period the previous year and a record for a half-year period, according to the People's Bank of China.

If the trend continues, the figure is expected to top 4 trillion yuan for the full year.

The ratio of trade settled in yuan to China’s overall trade during the first six months of the year was also a record 16.4 percent.

The Chinese government has been making efforts to facilitate the smooth circulation of yuan since the collapse of U.S. investment bank Lehman Brothers in 2008 to lessen dependence on the dollar in trade and reduce the possible adverse impact of the U.S. economy.

For example, China has concluded currency swap agreements with 20 countries and regions, including Britain and South Korea, to make it easier for other countries to acquire yuan.

It has also loosened regulations to promote exchange between renminbi and other currencies.

According to the Society for Worldwide Interbank Financial Telecommunication, the ratio of yuan used in global trade settlement rose to 0.87 percent in June, up from 0.24 percent two years earlier.

The percentage rose to 11th place in the world from 16th place a year ago, although it is still lower than 2.7 percent for yen. The dollar and euro accounted for 36 percent each.

Although China has become the world’s second-largest economy, its currency has not been widely used in global trade settlement due to strict regulations, earning it the nickname "sleeping currency."

If more trade is settled in yuan, Chinese companies would be able to reduce the risk of exchange-rate fluctuations, becoming more internationally competitive. However, the world economy would become more susceptible to China’s monetary and fiscal policies.

By KEIKO YOSHIOKA/ Senior Staff Writer
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