Hong Kong Ready to Start Trade Settlement in Yuan

Discussion in 'Wall St. News' started by ASusilovic, Apr 9, 2009.

  1. April 9 (Bloomberg) -- Hong Kong plans to be the first city outside mainland China to start settling trade in yuan, expanding use of the currency in a city whose exchange rate is pegged to the dollar, Chief Executive Donald Tsang said.

    “It will reduce foreign-exchange risks for companies, create more business for Hong Kong banks and diversify use of yuan funds,” Tsang said at a press briefing in the city. “The policy has already been approved. It’s almost here.”

    China is seeking to promote the yuan as an international currency after signing 650 billion yuan ($95 billion) in swap agreements with Hong Kong, Argentina, Indonesia, South Korea, Malaysia and Belarus in the past four months. The yuan has gained 21 percent against the dollar since its fixed exchange rate was scrapped in 2005, eroding the value of China’s central bank reserves and exporters’ profits.

    “These are baby steps toward liberalization of China’s capital account and internationalization of the renminbi,” said Tim Condon, head of Asia research at ING Groep NV in Singapore. “Access to renminbi is not going to be an issue. China is using its financial might to hedge any risk it might face in terms of supplies of central raw materials for its growth and demand in other markets for its products.”

    China’s State Council said yesterday it allowed yuan settlement for international trade in Shanghai and four cities in Guangdong province to promote global use of the currency and protect companies from swings in the dollar. The cabinet will release related regulations “as early as possible,” it said in a statement on its Web site.


    Baby steps. Baby will grow up.
  2. It is a bit like Russia deciding Cuba would do XXX in the good old days.

    Well, except that Cuba did have a choice.