More banks participate in cross-border RMB solutions

Ming Yong, a Chinese construction contractor, knows well the problems of not being able to use yuan in cross-border settlements.

When he completed a project in Myanmar five years ago, he had to bring over 300 million Myanmar Kyats (about 310,000 U.S. dollars) in cash back home to southwest China' s Yunnan Province, where he hired workers to count the money for days.

"Counting so much money caused our hand cramps," Ming joked, "the inconvenience also affected cross-border trade."

As the world's largest exporter and second-largest importer of goods, international use of renminbi is not at all commensurate with the importance of China's economic status.

At a forum in the 6th Greater Mekong Subregion (GMS) Week for Economic Corridors that concluded Tuesday in Kunming, capital city of Yunnan, Liu Yunhui, an official with provincial office of China Banking Regulatory Commission (CBRC), said that Hang Seng Bank, the Hong Kong and Shanghai Banking Corporation and the Bank of East Asia have already started businesses in Yunnan after China opened the province' s cross-border financial market.

In 2013, China gave the green light to Yunnan and neighboring Guangxi Zhuang Autonomous Region piloting financial reforms in their border regions, to promote the regional circulation of the yuan.

CBRC approved Malaysia' major commercial bank Maybank and Standard Chartered Bank branches in Kunming this April, raising the total number of overseas banks in Yunnan to seven, Liu said.

Wing Lung Bank and Development Bank of Singapore are also tapping into financial markets of this border province.

Vice President of Thailand's Kasikornbank Cai Weicai said at a forum during the Week that cross-border renminbi settlement will be more popular with the establishment of Association of Southeast Asian Nations (ASEAN) economic community.

Renminbi use in global market is an irresistible trend, he said. Kasikornbank, which does not want to lag behind by others, has been actively participating in cross-border yuan settlement.

China started trials of cross-border trade settlement in yuan in 2009 in Hong Kong, Macao, ASEAN countries and selected other locations. The scheme has now been extended to all parts of China and all countries and regions overseas.

In recent years, as economic ties between China and its neighboring countries and regions deepened, the demand to use yuan in trade transactions increased.

Official statistics showed that renminbi cross-border settlement between China and ASEAN amounted to over 1,120 billion yuan (about 180 billion U.S. dollars) from 2009 to late June last year. Meanwhile, volume of currency swap deals signed between the People's Bank of China (PBoC) and ASEAN countries hit 1,400 billion yuan.

Tang Qing, economist with Yunnan University of Finance and Economics, pointed out the best chance of renminbi globalization lies in Southeast and South Asian countries.

"Taking regional advantage of Yunnan and Guangxi, China can promote use of yuan in neighboring regions and finally achieve its international use," Tang said, adding that banks play a very important role in this process.

China also encourages domestic banks to go global. Yunnan now has had its six commercial banks sign settlement agreements with counterparts in nine countries, including Laos, Thailand, Myanmar and Singapore.

Approved by the Provincial Administration of Foreign Exchange, six enterprises are allowed to conduct currency exchange activities with other countries.

In January, a joint venture bank established by Fudian Bank and Laos Foreign Trade Bank opened in Laos, a key step toward Chinese financial institutions entering Southeast Asia.

In April, the Yunnan branch of China Construction Bank (CCB) signed an agreement with Maybank to explore channels for clearing growing cross-border yuan activities.

"With more banks setting up branches and participating cross-border yuan settlement, I believe cross-border transactions could be more convenient and trade will flourish," said Ming Yong.