Holders of Chinese currency UnionPay banking cards can pay for their shopping, dining, traveling and medical bills and extract cash in local currency as of Monday in the Republic of Korea (ROK), Thailand and Singapore, the first time ever for the card to be used outside China.
Chinese banking insiders say the move represents another substantial step China has taken to gradually open up its financial system and improve the convertibility of Renminbi (RMB), or the Chinese currency.
The People's Bank of China (PBOC), the country's central bank, said the move came after it allowed the cards to be used in Hong Kong and Macao for payment of private consumption over the past two years.
Under Chinese monetary rules, a holder of the Chinese currency UnionPay card issued by the country's 29 commercial banks and rural credit cooperatives can extract up to than 5,000 yuan (US$610) equivalent of local currency through automatic machine tellers in the three countries, Hong Kong and Macao.
Li Yang, a member of the Monetary Policy Committee of the central bank and director of the Finance Institute of the Chinese Academy of Social Sciences, described the move an actual arrangement for convertibility.
The central bank announced its decision to allow the use of the cards in the three Asian countries December 29, 2004 in a bid to offer card holders safe, fast and convenient payment services for Chinese citizens traveling in those countries, and boost foreign trade and people-to-people exchanges between China and those countries.
China has been gradually easing its control over its currency during the past decade, and the Chinese currency is now convertible on almost major capital accounts but not on capital accounts.
Zhang Jun, director of China Economic Research Center at the Shanghai-based Fudan University, said the moves, plus the recent measure to raise the ceiling of the amount of cash in Chinese currency to be brought into and from China, indicate the Chinese currency is "moving steadily to full convertibility".
But insiders believe that it will take time for the currency to become fully convertible.
The move will reduce the pressure on China to appreciate its currency as well as inflationary pressure, said the director.
China's central bank said it will support the efforts to make the RMB UnionPay card services available in more countries and regions where they are needed along with the country's expanding international exchanges and a growing army of Chinese travelers outside China.
China is now a country with the biggest potential for banking cards in the world, said bank experts.
(Xinhua News Agency January 11, 2005)
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