Bank of China transacts first cross-border yuan settlement
07/06/2009 Source: Xinhua News
The Bank of China (BOC), China’s largest foreign exchange bank, announced Monday that it had transacted the first cross-border yuan trade settlement deal Monday morning.
The BOC said its Shanghai branch had received the first cross-border yuan trade settlement deal from the BOC (Hong Kong) Monday.
The payee was Shanghai Electric International Economic and Trading Co. Ltd., a subsidiary company of Shanghai Electric Group Co. Ltd., and the remitter was the company’s business partner in Hong Kong, said the Beijing-based BOC in a statement on its Web site Monday.
The bank did not reveal the amount of the settlement in the statement.
Li Lihui, president of the BOC, said Monday at the ceremony of the first cross-border yuan trade settlement held in Shanghai that the deal could facilitate trade between China and neighboring countries and regions and help enterprises avoid exchange rate risks.
“Cross-border yuan trade settlement could help firms simplify trading procedures and reduce operation costs. It could also help banks to expand business scope, improve service, and forge stronger ties with enterprises,” Li added.
The BOC said its Shanghai branch had inked tentative agreements with 11 overseas agent banks on yuan trade settlement deals, which had remarkable companies yuan settlement demand, including Standard Chartered (Hong Kong), Bank of East Aisa (BEA), Hong Kong-based Wing Hang Bank and others.
On the same day, many other banks cleared transactions in yuan.
The Bank of Communications transacted the first cross-border deals.
“In the morning the Shanghai branch of the Bank of Communications has transacted six cross-border yuan settlements. The Guangdong branch and Shenzhen branch have also been dealing with the business,” said Zhang Xiaoming, head of the international business department under the Bank of Communications.
The Shenzhen branch of the Bank of Communications Monday transacted cross-border yuan settlements for two clients, Shenzhen Aerospace Guangyu Industry Group Corp. and T&J Electric (Shenzhen)Limited. The two sent yuan to their business partners in Hong Kong.
The China Construction Bank Monday said it had signed tentative deals with six overseas banks to cooperate in yuan cross-border settlement.
The BOC Monday said its branch in Guangdong Province would transact 6.93 million yuan (1.01 million U.S. dollars) of cross border yuan settlements Tuesday in forms of remitting yuan, receiving yuan and opening letters of credit in yuan.
The Industrial and Commercial Bank of China (ICBC) Monday said its branch in Indonesia had opened letters of credit of 372,000 yuan (54,466 U.S. dollars) to a company in Shanghai, indicating the launch of its cross-border yuan trade settlement.
“Cross-border yuan trade settlement could help enterprises avert exchange rate risks and reduce cost in converting foreign exchanges,” Shanghai Electric Chairman Xu Jianguo told Xinhua.
China’s State Council, or Cabinet, announced in April a pilot program to allow exporters and importers in Shanghai, and southern Guangzhou, Shenzhen, Zhuhai and Dongguan cities to settle cross-border trade deals in Renminbi(RMB), or yuan.
China last week issued detailed regulations for the pilot program for cross-border trade settled in yuan. The rules specified how to make transactions using yuan to settle trade with Hong Kong and Macao and regional trade partners.
Ou Minggang, director of the International Finance Research Center of China Foreign Affairs University, told Xinhua Monday that cross-border yuan trade settlement provided exporters and importers with another option when conducting trade settlement and banks could explore a new business area.
“This move was in line with the market needs and it could also enhance trade volume growth,” Ou added.
