Yuan Further Integration

China's central bank recently published a circular, effective July 21, that aims to improve policies for cross-border renminbi settlement in e-commerce and other new modes of foreign trade to enhance the real economy and facilitate foreign trade and investment.

According to the circular, all current account transactions that involve payment institutions are eligible for cross-border renminbi settlements. Banks and payment institutions are required to carry out settlement services and detailed arrangements for authentication verification and anti-money laundering.

In addition to providing more detailed rules for renminbi settlements cross-border, the circular enlarges the scope of transactions that are eligible for settlement. The move is expected to meet the growing demand for cross-border renminbi settlements from foreign trade companies due to a more flexible exchange rate for the currency.

In particular, enterprises would be able to avoid currency exchange risks by settling all current account transactions in renminbi when the expatriate salaries are paid out or when investment returns are repatriated overseas.

More policies to facilitate the cross-border usage of the renminbi are expected to come about and further cement the basis for renminbi internationalization.

Cross-border renminbi settlement has seen rapid growth in China as data shows that using the country's currency in cross-border trade amounted to 806 billion yuan ($120.4 billion) in May, up 33.84 percent year-on-year.

As of the end of May, banks and payment institutions had settled renminbi settlements for cross-border e-commerce in Shenzhen, Guangdong province, benefiting approximately 81,000 e-commerce businesses, according to the Shenzhen branch of the People's Bank of China.