BOC to launch yuan settlement

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The Bank of China, China's largest foreign exchange bank has transacted the first cross-border RMB trade settlement. Monday's transaction is the first time the Chinese yuan has been the currency used in a cross border deal. It also means the cross-border yuan settlement scheme is now being put into practice.

The payment will be sent to Bank of China's Shanghai branch from the Bank of China in Hong Kong on Monday. The RMB transaction is between Shanghai Electric International Economic and Trading Company and its business partner in Hong Kong.

The BOC Shanghai branch has now reached tentative agreements with 11 overseas agent banks on yuan trade settlement deals, mostly are large banks in Asia. It's expected there will be a remarkable demand for trade deals to be handled in RMB.

China last week issued detailed measures to regulate the pilot program for cross-border RMB settlement. The cities of Guangzhou, Shenzhen, Zhuhai and Dongguan in Guangdong province, neighboring Hong Kong, as well as Shanghai, were chosen to start the trial. The rules specify how to make transactions using yuan to settle trade with Hong Kong and Macao and regional trade partners. So far the first batch of 400 foreign trade companies have been ratified for the pilot program.

The scheme is to test the waters for the currency's gradual liberalization. China is also looking at allowing RMB trade settlement with other trading partners.