July 18--The yuan is expected to play a greater role in international trade and financial transactions within the next few years aided by China's economic growth and the Shanghai free-trade zone, says a Bank of China senior official.
Zhang Lei, general manager of the bank's Bangkok branch, said with support from the Chinese government's economic policy, the Shanghai free-trade zone and the yuan's role in international trade, the Chinese currency is expected to gain global prominence in the next three to five years.
The Shanghai free-trade zone was launched last September, aiming to reform China's regulated economy into a more market-based economy by easing foreign investment restrictions, letting markets determine interest rates and allowing the yuan to be swapped freely for other currencies.
"Around 10 trillion yuan (52 trillion baht) has been used in international business trading from 2009 until today, 4.6 trillion yuan of which was used in 2013," Mr Zhang said on the sidelines of a seminar titled "RMB Internationalisation ? the Opportunities and Challenges in Thailand" hosted by the Bank of China yesterday.
"3.2 trillion yuan was used between January and May this year, and this indicates how the usage of yuan has been increasing for international trade."
The Bank of China, which is supervised by the People's Bank of China, has been supporting an increase in yuan use for international trade through issuing financial products such as bonds and debentures, said Mr Zhang.
He said the Bank of China has also published two indexes, the Cross-border RMB Index and Offshore RMB Index, to indicate the yuan's internationalisation in offshore markets and cross-border trade.
The Bank of China'sBangkok branch has recorded 2.7 billion yuan in financial settlements since 2009, said Mr Zhang.
Cao Yuanzheng, the Bank of China's chief economist, said yuan internationalisation does not mean that trades and transactions have to be settled only in the Chinese currency, but rather offers an alternative way for trade settlements apart from the US dollar, the euro, the British pound and the yen.
About 90% of trades between China and Thailand are settled in the dollar, while yuan settlements make up less than 10%, he said.
China's economic stability and a cost-benefit advantage are factors supporting yuan settlements, particularly in Asia, said Mr Cao.
Prof Tang Zhimin of the Panyapiwat Institute of Management said market forces would determine the future of yuan settlements rather than state policy, while other factors that would also come into play included public utilities facilitating yuan settlements.
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