Beijing's latest move to relax yuan trade settlement rules will help smaller businesses use the currency to settle cross-border trades, but it's unlikely to lead to a big boost in volume.
The People's Bank of China (PBOC) said earlier this month that it was expanding the yuan trade settlement scheme to allow all mainland firms to settle cross-border trades in yuan. Previously, only 60,000 companies were allowed to do so.
The central bank's announcement about the new rules underscores the success of a 21/2-year trial by Beijing to globalise the yuan, which it hopes will one day rival the US dollar and the euro as a major trade-settlement currency.
In July 2009, China opened the door an inch, allowing 365 firms to settle trade in yuan, but then expanded that to 60,000 companies in 2010 and volume ballooned as a result.
There were 2.08 trillion yuan (HK$2.54 trillion) worth of trade settlements as of December 2011, representing about 9 per cent of all China's imports and exports.
Ngan Kim-man, Hang Seng Bank's head of RMB business strategy and planning, said the biggest beneficiaries of the new move would be small and medium-sized enterprises (SMEs) on the mainland.