March 03rd, 2009 | Xinhua Chinese currency plays important role in settlement for Sino-Vietnamese border trade
Ruan Jinhua, who has worked as a currency exchanger for nearly 10 years in Dongxing, a city perching on the border between China and Vietnam, never expected that the Chinese currency, Renminbi, would be so well-received along the border as it has been in the last few years.
“When I began to do this business, traders were prone to choosing the U.S. dollar or the Vietnamese dong for trade settlement payments. But the Renminbi has become a hot choice in recent few years, ” said Ruan, a 40-year-old resident in the border city of southern China’s Guangxi Zhuang Autonomous Region.
The land border between China and Vietnam is 1,300-odd kilometers long. Dongxing is opposite the Mong Cai special economic zone of Vietnam across the Beilun River.
Everyday Dongxing Port sees long queues of travelers crossing the border. Most of them run small shops and stalls in Mong Cai.
“It is bustling at the border every day. Local residents and merchants from other parts of China cross the border to sell home electrical appliances and garments in Vietnam,” Huang Jiachao, head of the municipal travel agency, told Xinhua Tuesday.
Huang said several thousands “transnational commuters” crossed the Sino-Vietnamese border every day, and more than 10,000 local Chinese engaged in the border trade — including more than 6,000 registered dealers from the urban districts of Dongxing.
“The robust border trade has made trade settlements important,” said Huang. Two settlement approaches have emerged accordingly — one was settlement through “roadside banking peddlers” like Ruan Jinhua, the other was settlement through official commercial banks,Huang said.
“Roadside banking peddler” is a nickname for local grassroots money changers.
Roadside money changing, conducted face-to-face and involving small amounts of money, is seen as a more convenient and efficient way of trade settlements, according to Huang.
A group of local people in Dongxing and Pingxiang (another city on the Sino-Vietnamese border), like Ruan Jinhua, profit on price differences in money changing as a result.
Bilateral trade between China and ASEAN members exceeded 230 billion U.S. dollars in 2008, a growth of 13.9 percent year-on-year. The total included more than 20 billion dollars in trade between China and Vietnam.
“Most of our clients are big ones, demanding settlement payments in several hundred thousands or several million yuan,” LuXin, assistant to head of Ping Xiang branch of the Agriculture Bank of China (ABC), told Xinhua.
At the end of last December, there were 163 companies recording settlements for border trade in Pingxiang, including 125 that had opened deposits accounts at ABC’s local branch.
The official exchange rate for the Renminbi against the Vietnamese dong is one yuan for 2,100 Vietnamese dong. But in underground markets in Dongxing and Pingxiang, the rate is one yuan for 2,500 Vietnamese dong, according to Lu. He believed this indicated “many are confident of the yuan and willing to settle trade payments in the Chinese currency.”
“The important role for Renminbi in the border trade between China and Vietnam has been established,” he said.
There are also calls from China’s neighbors to use the yuan to settle bilateral trade payments, according to Wu Xiaoling, former Chinese central bank deputy governor.
China had signed settlement agreements with eight neighboring countries, including Russia, Mongolia, Vietnam and Myanmmar.
Guangxi Zhuang Autonomous Region and Yunnan Province will be officially allowed to use Renminbi to settle trade payments (besides those for border trade) with ASEAN members, according to a government announcement late last December.
China has decided to allow the yuan to be used for settlement between Guangdong Province and the Yangtze River Delta and the special administrative regions of Hong Kong and Macao.
But the government did not give any details of how and when the pilot currency program would start.
“The move will increase the yuan’s acceptance in Asia, which will help it become an international currency in the long run,” Zhao Xijun, finance professor at Renmin University of China, was quoted as saying in a report by China Daily.
The yuan’s acceptance has been rising in recent years, thanks to the nation’s economic prowess and its 1.95-trillion- U.S. dollar reserves of foreign exchange, according to the newspaper.
Most of China’s external trade is settled in U.S. dollars and the euro at present. But the paper said that many analysts predicted the dollar might depreciate substantially in the coming years because of the ailing U.S. economy.