5 cities chosen for cross-border yuan transactions

By Qin Zhongwei (chinadaily.com.cn)
Updated: 2009-07-03 21:21

Five major cities in China were chosen to participate in a program that will help facilitate future trade transactions between China and its neighboring countries.

After three months of preparation, Shanghai, Guangzhou, Shenzhen, Zhuhai and Dongguan will use the yuan in cross-border transactions. The administrative rules were issued by the People's Bank of China and other five ministries yesterday to "smoothly execute" trade payments.

With exception to Shanghai, the other four cities are all located in the Pearl River Delta.

This move will allow the risks of exchange rate fluctuations to be reduced and will guarantee a smooth trade between China and its neighboring countries amid the economic downturn, said Ding Zhijie, vice-dean of the Financial School of University of International Business and Economics.

But the new rules also make it clear that not all the enterprises in these five cities are allowed to settle the trade transactions in yuan, except those "designated and eligible”.

Last December, the Chinese government announced the pilot project to promote use of the yuan to settle bilateral trade payments with Hong Kong and ASEAN (Association of Southeast Asian Nations) members, but did not specify which Chinese cities would participate at the time.