China aims for liberalization of RMB

The State Council has recently announced its currency RMB will be used to
settle cross-border transactions on a trial basis. The trials will begin in five
Chinese cities. Banking insiders welcome the move, saying this is a positive
step towards making the RMB a more international currency.

The State Council has recently announced its currency RMB will be used to settle cross-border transactions on a trial basis.

Construction is in full swing for the 2010 World Expo in Shanghai. As China's
financial hub, the city now carries the country's ambitions to become a global
financial powerhouse, and the goal is to do it by 2020.

One pre-condition for an international financial center is to have a fully
convertible currency, a target that still seems somewhat remote for China. But a
recent decision by the country's policy makers to allow use of the RMB to settle
cross-border transactions in Shanghai and four other Chinese cities has been
well received by many banking experts at a forum in Shanghai.

Yang Zaiping, Executive Vice President of China Banking Association, said,
"The internationalization of yuan is a very necessary step to push forward. US
dollar, as a single international reserve currency, has unbalanced the world
economy. The diversification of the international currency should be the
long-term direction. Though yuan cannot be compared to the dollar at the moment,
we must start to work for this goal."

Experts say using yuan to settle cross-border transactions will not only
reduce businesses' exchange rate risks, but will also create new services for
banks. Bank of Communication is expected to be among the first group to carry
out the new service.

The State Council has recently announced its currency RMB will be used to settle cross-border transactions on a trial basis.

Dr. Lian Ping, Chief Economist of Bank of Communications, said, "Allowing the
use of Renminbi for settlement in international trade will bring various new
businesses for banks, such as exchange services, commission charges for
account-opening, consulting fees, as well as trade financing. Banks will receive
benefits in many aspects."

Other experts at the forum say using the yuan to settle international
transactions will help reduce China's reliance on the US dollar. When Renminbi
becomes a more international currency, it will help to build China's influence
in world financial markets.