China's State Council, or Cabinet, announced a pilot program to allow exporters and importers in five cities to settle cross-border trade deals in Renminbi, or yuan.
The cities are Shanghai, Guangzhou, Shenzhen, Zhuhai and Dongguan. The latter four are all in south China's Guangdong Province.
Attendees at a State Council executive meeting Wednesday, presided over by Premier Wen Jiabao, agreed settling cross-border trade deals in yuan was important for promoting economic and trade ties between China and neighbouring countries and regions.
Information about when and how the trial program will start was not available.
The State Council urged departments concerned to issue relative rules as soon as possible.
The yuan settlement was in accordance with the market demand, said Cao Honghui, a researcher with the Institute of Finance under the Chinese Academy of Social Sciences (CASS), but increasing yuan's global acceptance would be decided by factors such as the country's economic development and financial system improvement.
China has been arranging currency swaps with trading partners to bypass the U.S. dollar in trade settlements. These currency swaps would guarantee the progress of yuan settlement, said CASS economist Zhang Bin.
Since mid-December, China has signed currency swap contracts worth 650 billion yuan (about 95.6 billion U.S. dollars) with six central banks in Hong Kong, the Republic of Korea, Malaysia, Belarus, Indonesia and Argentina. The swap deals allow other overseas central banks to lend yuan to local importers who want to buy Chinese goods.
(Xinhua News Agency April 9, 2009)
