ANNOUNCED AS TEMPORARYNo
Controls on commercial transactions and investment instruments
On 1 July 2009 the Ministry of Commerce of the People's Republic of China announced that it would launch a pilot program for cross-border trade in renminbi, the national currency of the PRC. The announcement allows the Ministry of Commerce, the Ministry of Finance, the State Council, provincial governments, the People's Bank (the Central Bank of the PRC) and other bodies of the State to coordinate on identifying banks and firms eligible for participation in the program.
Under the pilot project, commercial banks domiciled in Hong Kong and Macau (which do not use the Renminbi) will be allowed to settle commercial international trade transactions in RMB and will be permitted to use the RMB-denominated funds provided by the People's Bank for trade finance services provided to approved firms. It will also permit commercial banks to open RMB-denominated accounts for overseas banks in order to facilitate the clearing of trade in the national currency.
Earlier this year, the PRC announced several agreements with other nations, including Argentina, Belarus, Indonesia, Malaysia and South Korea, to conduct trade in goods in national currencies, rather than the euro or the US dollar. China has been a vocal proponent of the creation of an international reserve currency as an alternative to the US dollar. It is the largest holder of US treasury securities and has foreign currency reserves in excess of US$2 trillion, a product of the country's large trade surplus with the United States. The country has long come under criticism for maintaining what some economists believe to be an undervalued exchange rate. Gradual increases in the use of the renminbi in international transactions might pave the way for the Chinese currency to become freely floating on international markets.
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