http://news.xinhuanet.com/english/2009-10/23/content_12308041.htm
NANNING, Oct. 23 (Xinhua) -- The Chinese currency yuan is expected to
play a bigger role in regional trade as the China-ASEAN Free Trade
Area (CAFTA) is to be realized on January 1 of 2010.
"The upcoming CAFTA, which boasts the largest population among all
the world's FTAs and allows zero-tariff on 90 percent of products
traded between China and ASEAN, will quicken the process of RMB
regionalization, "Xu Ningning, executive secretary general of China-
ASEAN Business Council, told Xinhua at the 6th China-ASEAN Expo in
Nanning, capital of Guangxi Zhuang Autonomous Region.
Free trade demands free flow of currency, making possible the
regional use of RMB, he said.
The expo, held from Oct. 20 to 24 ahead of the operation of FTA to
embrace free trade and mutual investment, attracted state leaders,
high-ranking officials and entrepreneurs from inside and beyond the
ASEAN region.
Alongkorn Ponlaboot, deputy minister of commerce of Thailand,
believed RMB would play a more important role in bilateral trade
between China and ASEAN in the future.
He said yuan was a very stable currency and expanding its use
could help reduce risks faced by the ASEAN countries in using the U.S.
dollar, which has become highly volatile as a result of the global
financial crisis.
Pung Kheav Se, general manager of Canadia Bank Plc. of Cambodia,
echoed Thailand's deputy minister, saying trade between China and
ASEAN kept growing and less risk by the use of RMB would benefit both
sides.
Data from China's General Administration of Customs showed trade
between China and ASEAN totaled 105.88 billion U.S. dollars in 2004,
and rose to 231.07 billion U.S. dollars in 2008. China and ASEAN are
currently the fourth largest trade partners to each other.
CHALLENGES AND EFFORTS
However, the use of yuan in ASEAN fell far short of the trade
growth between China and ASEAN. Currently RMB settlement was mainly
adopted in border trade which accounted for only 10 percent of the
China-ASEAN bilateral trades, Teng Chong, board chairman of Guangxi
Beibu Gulf Bank, told Xinhua.
Pung Kheav Se said currently RMB, U.S. dollars, Thai Baht and
Vietnamese Dong were in circulation in Cambodia, but the amount of
yuan was small, mainly used for tourism and small commodity business.
He did not give specific figures.
The main reason was that Cambodia was not a developed economy and
some people had inadequate knowledge about yuan, he said, suggesting
China should gradually establish credit system and settlement
mechanism of yuan in ASEAN, and then expand its use globally.
Su Ning, vice governor of China's central bank, said financial
cooperation between China and ASEAN was still at the initial phase and
financial markets were not open enough. But potential for cooperation
was huge as finance in China and ASEAN seeing fast development
currently.
China has been launching pilot RMB programs over the years, but
the pace has obviously quickened since the onset of the global
financial crisis as the U.S. dollar has been getting weaker, arousing
concerns that an unstable dollar would lead to increased costs and
risks for traders.
Last December, China announced pilot programs to settle trade
deals in yuan between the country's two economic powerhouses,
Guangdong Province and the Yangtze River Delta (which includes
Shanghai) and the two special administrative regions of Hong Kong and
Macao. A similar arrangement was proposed for exporters in Guangxi and
Yunnan Province in southwestern China to settle trade in yuan with
ASEAN.
In April, China announced a pilot program to settle cross-border
trade deal in yuan in five cities including Shanghai, Guangzhou,
Shenzhen, Zhuhai and Dongguan.
Currently, China has sealed cooperation agreements of bilateral
trade settlement with the central banks of Laos and Vietnam in ASEAN.
EXPECT WIDER RMB USE
A Vietnamese furniture trading company named Vietnam Charity
Trading Company Ltd. had attended the expo for five years. It began
trades with China 22 years ago and has been exporting 70 percent of
its products to China.
The company buys materials from Laos and sells products to China
and other countries, in which dollars, yuan and Vietnamese Dong are
adopted. "That makes the process very complex and always results in
losses because of the fluctuation of exchange rates," said Huang
Yifan, executive director of the company.
"I really hope there is a single currency like the euro to cut off
the cost of exchanging currency and make the whole process easier,"
she said.
"I hope yuan could be the one as it has been stable and welcomed
by the ASEAN people," she said, adding that yuan is very popular in
Vietnam, Cambodia and Laos.
Grace See Choo, managing director of Grace Cosmetics, a Malaysian
cosmetic company, said her company had been importing packing
materials from China since 2000. "We always traded in yuan, which
operates well," she said.
"China is a huge market for us. Guangxi's market alone is larger
than that in our whole country. We prefer yuan as the trading currency
if the Chinese part want the same," She said. The company now is
looking for a Chinese agent to explore Chinese market.
Although yuan had gained reputation among ASEAN people, efforts of
the ten nations' central banks were still necessary to commit to a
consensus of popularizing RMB, Teng Chong said.
Xu Ningning said new economic situation had created stage in Asia
for RMB. The three FTAs between ASEAN and China, Japan and the
Republic of Korea, respectively, will build a wider platform for RMB
exchanging.
"Although it needs time to breed a new trade market or a new
currency market, the CAFTA is believed to create new space for the
regionalization of RMB," Xu said.
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