News from China’s regional cities rarely makes our radar, but this is an exception.
BEIJING, April 8 (Reuters) – China took a step towards using the yuan to settle trade with Hong Kong and some other neighbouring trade partners on Wednesday, by naming five cities that will participate in the scheme.
The State Council, or cabinet, named Shanghai as well as four cities in southern Chinese province of Guangdong to start the trial scheme. Those four cities are Guangzhou, Shenzhen, Zhuhai and Dongguan.
The approval paves the way for municipal authorities to make specific arrangements for the launch of the programme, the general outline for which it unveiled in December.
‘Carrying out yuan settlement in cross-border trade has significant meaning in promoting bilateral trade with neighbouring countries and regions,’ the State Council said in a statement on the government’s web portal (www.gov.cn).
Yuan settlement would also help to prevent exchange rate risks and to promote stable trade growth, it added.
Commerce between those five cities and Hong Kong is likely to be small beer compared to the wider world of global trade, of course, but this is still a significant move. A big chunk of import/export invoicing has traditionally been done in US dollars. Nearly all US trade is invoiced in USD (naturally) but even in places like Europe about a third of Eurozone imports and exports are invoiced in dollars. In Asia, about 8 per cent of import/exports are invoiced in USD.
Taken together with China’s $95bn worth of bilateral currency swap lines and SDR rumblings then, you can’t help but think that China is pretty serious about challenging the USD, or at least moving away from it.
Oh, and there’s that pesky issue of US Treasuries too – China was a net seller in January and February, before resuming purchases in March, according to data released over the weekend and written up by the New York Times.
Related links:
The Euro as invoicing currency in international trade – Kiel Institute for the World Economy via SSRN
Chinese exporters shun flagging US dollar in favour of stronger rivals – FT
China: First Argentina, then the world – FT Alphaville
China to US: We hate you – FT Alphaville
China’s dollar dilemma – FT
All the Treasuries in China – FT Alphaville