Kashgar, a major prefecture of northwestern China's Xinjiang Uygur autonomous region, has developed renminbi cross-border payment and receipt business with 15 countries and regions between 2011 and June 2016, said a central bank official on Tuesday.
Managed by six commercial banks in Kashgar, the total cross-border renminbi settlement amount reached 4.64 billion yuan ($695 million) by June this year.
Wang Xiaodong, president of Kashgar central sub-branch of the People's Bank of China, said as surging trade activities push China and more countries along the Belt and Road Initiative toward a new cross-border renminbi settlement mechanism, renminbi may come to pack more power compared with the greenback when making payments in these countries.
As the dominant reserve currency in the world, the US dollar is mostly used in global trade transactions and for invoicing goods and services. The majority of transactions between Chinese and foreign companies are still based on its exchange rate.
"We welcome more countries and regions on these two trading routes to settle bilateral trade in local currencies. The implementation of a currency settlement agreement will promote more currency exchanges between the two sides," said Wang.
Ying Jian, senior economist of the renminbi business division of the economics and strategic planning department at Bank of China (Hong Kong) Ltd, said: "The Belt and Road Initiative focuses on improving connectivity among relevant countries and regions. During the process, financial cooperation will play a guiding role. As a key factor of financial cooperation, the renminbi business is highly important to the initiative."
Currently, the use of renminbi in countries along the routes of the Belt and Road Initiative is still limited in terms of depth and width, partly because Chinese banks are still at the beginning stage of deployment along the Belt and Road Initiative, he said.
Statistics show that the renminbi settlement volume took up slightly more than 20 percent of the gross settlement volume in different currencies in relevant countries; and the renminbi settlement volume in countries along the Belt and Road accounted for nearly 20 percent of the total renminbi settlement volume worldwide.
But Ying saw many opportunities and great potential for growth in renminbi business. With Chinese companies expanding their business in relevant countries, they will increasingly use the renminbi for payment, settlement and acquisitions.
"Local residents will also use the renminbi for assets management, and local companies will use the renminbi and US dollar for financing. Furthermore, as high risks exist in countries along the Belt and Road, a set of renminbi risk management solutions and derivative financial instruments are needed to hedge against risks during the process of investment, mergers and acquisitions," said Ying.
