Beijing began a trial program aimed at settling cross-border trade by using the yuan on Wednesday, allowing local enterprises to cut costs and avoid exchange rate risks with their international transactions at a time when the appreciation of the yuan has become a problem for many foreign traders.
The trial program, which began in July in Shanghai and in four Guangdong cities, is spreading to 20 municipalities and provinces, including Beijing, Tianjin, Sichuan and Hainan, the People's Bank of China said on its website this week.
Under the program, companies will be able to use the yuan to settle trade deals with businesses in any country, expanding from Hong Kong, Macao and the 10 countries that are members of the Association of Southeast Asian Nations.
On Wednesday, the first day that the trial program went live in the capital, eight Beijing-based companies closed international and cross-boundary deals by transferring a total of 491 million yuan. Trading partners came from such places as the United States, Hong Kong and Macao.
China Citic Bank, the Beijing branch of Industrial and Commercial Bank of China (ICBC), and other three banks assisted the transactions.
"To settle trade in yuan will greatly facilitate local enterprises investing or making deals overseas. It simplifies trade procedures, reduces exchange processing fees and lowers potential risks of exchange rate fluctuations," said Shan Qiang, deputy director of the operating management department at the People's Bank of China.
Banks in Beijing will also get benefits from yuan settlement and they will start to compete for potential clients in the field.
Wang Zhenjun, president of ICBC Beijing branch, said his bank had done a great deal of preparatory work, starting last year, on settling cross-border deals with the yuan.
"Before the launch, we visited major companies in Beijing, such as Sinopec and Sinochem, to introduce the business. So, on the first day, we helped China International United Petroleum & Chemical Co, a subsidiary of Sinopec, funnel 389 million yuan abroad to buy oil," Wang said.
Ding Guoliang, head of HSBC Beijing branch, said the company was still expecting its first yuan settlement in Beijing, but he was optimistic it will happen soon.
"Besides, HSBC will launch new products and services to cater to greater yuan business," Ding said.
