ADB to offer trade finance in yuan, rupee

Bank's move to encourage use of local currencies for settlement

The Asian Development Bank is to include the yuan in its Trade Finance Program, in a move which further bolsters global use of the currency.

The ADB's board of directors on Tuesday approved the inclusion of the Chinese currency and Indian rupee in the program, which "fills market gaps for trade finance by providing guarantees and loans to banks to support trade", it said.

More than 50 percent of the program's portfolio supports intra-regional trade and the move is expected to further enhance trade within developing Asia, according to the bank.

The program has supported more than $10.6 billion in trade since 2009, and previously only covered transactions denominated in US dollars, yen and euros.

"This move will encourage the use of regional currencies in trade and reduce reliance on the US dollar as a settlement currency, which is in short supply in many countries," said Steven Beck, head of the ADB's finance program.

Intra-regional trade in Asia in the next 10 years will account for at least half of the continent's foreign trade, the ADB said.

At present, 90 percent of all foreign trade in Asia is settled in US dollars. "But this percentage is expected to decline," it said.

Operating in 16 countries, the program's most active markets have been Bangladesh, Vietnam, Pakistan, Sri Lanka and Nepal.

Cross-border use of yuan has been increasing as Beijing takes steps to encourage use of the currency worldwide.

Last year, more than 2 trillion yuan ($313.7 billion) in international trade was settled in yuan, of which 92 percent was conducted through Hong Kong.

In the first half of the year, 1.25 trillion yuan worth of trade was settled in the Chinese currency, up 76 percent year-on-year. And the amount of foreign direct investment settled in the Chinese currency stood at 110.5 billion yuan, according to data released last week by the People's Bank of China, the country's central bank.

Interest in using the Chinese currency has spread quickly to other continents, especially Africa, said Anthony Lin, head of transaction banking at Standard Chartered Bank (China) Ltd.

African importers will be more likely to use yuan to settle transactions as they have a constant appetite for Chinese products, especially machinery, said Razia Khan, regional head of research for Africa at Standard Chartered Bank.

wangxiaotian@chinadaily.com.cn

(China Daily 07/19/2012 page15)