Yuan Cross Border Trade Increase
China recently decided to develop and grow trade in yuan, and it seems to have been a very good decision on their part when looking at the financial figures for January 2011. Hoping to eventually develop the yuan currency in the global trade market, the country decided to give pilot companies selected from various provinces across China, including Shanghai, Zhejiang and Liaoning, the opportunity trade in yuan, and it has been a major success. The program was initiated in the year 2009, and already the positive outcome of this new policy can be seen.
In 2010 the cross border trade from China had increased to 510 billion yuan. If results such as these continue to increase, China will become less dependent on the US Dollar currency and begin to globalize the yuan at a faster rate. The Bank of China researched the cross border trade settlement for the start of the year, and released the startling figure of forty billion yuan, or $6.09 billion. This figure means that in the first month of 2011, the yuan cross border trade had already made one fourth of the total amount of trade of last year. In 2010 the total trade amount came to 160 billion. The currency itself has also risen, and if cross border yuan trade can continue on this path, China will enjoy an extremely successful year.
Director of the Capital Management Department of Shanghai’s JP Morgan Chase, Xu Sheng, commented on the investment side of the policy, saying: “Allowing direct investment in the currency is a start to liberalizing the capital account and will help ease the pressure of excessive liquidity.” He continued, commenting: “It will further accelerate trade settlements in the currency and expand offshore yuan markets.”
Another development tool was initiated by the Bank of China. They have allowed various companies from the United States to open bank accounts in yuan. This permits the company to convert a maximum of $20 000 into yuan. In other countries, including South Africa, Japan, India and Canada, companies can now open yuan currency accounts at the Bank of China branches. Even though the Bank of China does control a large portion of the market in regard to cross border yuan trade, other banks have also been making the necessary changes to accommodate yuan trade and related products for this currency.