KUNMING - A pilot program on renminbi cross-border settlement was launched in Kunming, Yunnan province, on Tuesday as part of the nation's effort to gradually promote the renminbi into a global currency.
"It is of great significance to expand the use of renminbi in settling cross-border trade deals, as it will help companies head off risks in exchange rate fluctuation and reduce currency exchange costs," Du Jinfu, vice-governor of the People's Bank of China, the central bank, said at the launch ceremony.
Under the program, a batch of companies will sign up agreements with banks to settle deals in renminbi, Du said.
The country initially unveiled a trial scheme a year ago on yuan cross-border settlement in five cities - Shanghai, Guangzhou, Shenzhen, Zhuhai and Dongguan.
On June 22, the government decided to expand the scheme to 20 provinces and regions across the country, including Yunnan province, which neighbors ASEAN members Myanmar, Laos and Vietnam.
Zhang Zulin, mayor of Kunming, said the move would help boost the country's trade ties with ASEAN countries.
"The volume of yuan-denominated trade deals in Yunnan province has increased greatly in the past few years. At present, the renminbi has replaced the US dollar to become the dominant currency in settling cross-border trade in Yunnan."
Some 97 percent of Yunnan's cross-border trade was settled through renminbi with a total value of 2.83 billion yuan ($417.76 million) in the first half of 2010, he said, adding that Kunming aims to build itself into a financial center in Southwest China.
However, analysts said using the renminbi to settle trade is still in its initial stage.
"The total value of renminbi settlement business was a little over 70 billion yuan last year, compared to the country's total trade value of some 15 trillion yuan during the same period," Frank Gong, managing director of JP Morgan Chase Asia-Pacific.