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The how and the why of renminbi trade finance
19 May 2010
Oliver O’Connell examines the potential for renminbi trade settlement to usher in a new phase in global trade, and what the advantages are for China’s trading partners.
Read more:
renminbi trade finance
RMB trade settlement
China exchange rate
Renminbi dollar
yuan dollar
ASEAN
China Africa
If you were waiting for a sign of what the future of renminbi (RMB) trade settlement holds, it is the recent commitment by a Chinese bank to do RMB trade settlement of Latin America-sourced commodities into China via a US trading company.
It would seem that this indicates greater confidence about the efficacy of RMB trade settlement. Certainly there is great interest from banks and a weight of evidence to suggest that there are a number of benefits for China’s trading partners to consider requesting RMB settlement from their banks.
With the controls that exist around the RMB as a currency, trade finance is a natural route for its internationalisation given the now well-trod trade routes between China and Africa, the Middle East, South-East Asia and Latin America. It would seem that for now there has to be an underlying flow of goods behind any transaction. China wants wider...
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