Yuan trade settlement value declines by 12pc in July

Cross-border yuan trade settlement last month fell to the lowest level since February even as the total value of imports and exports shot up.

July's trade value settled in yuan fell to 498.4 billion yuan (HK$626.6 billion), down 12 per cent from a month earlier, according to the People's Bank of China.

During the same period, the total import and export value rose by 10.7 per cent from a month earlier and 6.4 per cent year on year. The 14.5 per cent year-on-year export growth in particular surprised the market.

Economists link the decline in yuan settlement to the depreciation of the currency in the first half and expect more companies to return to settling in yuan when the currency - also known as renminbi - is back on a steady appreciation track.

"Corporates often choose to settle in renminbi if the currency is appreciating. Although the renminbi bounced back in July, most contracts last month may have been signed earlier when the currency was depreciating," said Nathan Chow, an economist at DBS.

The yuan has been recovering since May after depreciating around 3.2 per cent in the first five months. The overall loss in the currency value this year narrowed to 1.6 per cent last week.