ASTANA, Kazakhstan - China's yuan should play a bigger role than the US dollar in trade settlements in Central Asia in order to boost regional trade, a top Chinese banker said on Monday.
"China should continue to push the internationalization of the yuan and expand cooperation with neighboring countries to settle trades in the currency," said Li Ruogu, president and chairman of the Export-Import Bank of China (China Eximbank) at a news briefing in Astana.
China Eximbank, a major policy bank of the country, has already started to provide yuan-denominated loans to banks in neighboring countries and the lender is also keen on extending loans to members of the Shanghai Cooperation Organization, according to Li.
"The yuan should play a bigger role than the US dollar in the region," he said. "The use of the yuan in trade settlement will help boost regional trade relations."
China has approved a pilot program in the northwestern Xinjiang Uygur autonomous region for trade and investments between China and its Central Asian neighbors to be settled in the Chinese currency.
Fifteen banks in Xinjiang are certified to handle cross-border yuan services while 20 foreign banks and financial institutions can offer other yuan-related services.
Hu Xiaolian, deputy governor of the People's Bank of China, has said that the trade settlement in yuan between China and Central Asian countries will help mitigate the exchange rate risk and boost regional trade.
But some analysts said that difficulties of using yuan in the trade settlement with Central Asian countries remain as the major exports of those countries are energy-related products such as oil and gas which are generally settled in US dollars in international trade.
The limited channels for the yuan's outbound flows in the region also pose a challenge for trade settlement, analysts said.
Meanwhile, China will continue to expand direct investment in Central Asia as President Hu Jintao has agreed to extend loans worth $10 billion to Shanghai Cooperation Organization members.
Li said that China Eximbank, one of the key lenders of the $10-billion loan, has funded about 20 projects including communications, transportation and electricity in Kazakhstan, a major trade partner of China in Central Asia. The total investment value has reached $6 billion to $7 billion.
The lender has also set up representative branches at local banks in Russia, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan to jointly fund local projects, Li added.
