China ready to exand Yuan trade area to ASEAN countries , Myanmar, Laos and Vietnam

MYsinshow.com carries a fascinating story - China: China Allows Yuan Trade With Asean, Hong Kong And Macao

The Bulk of China's trade is currently denominated in dollars.These are held in FOREX accounts but have been used to purchase immense quantities of US Treasury Bonds - although their holdings roughly equate with European Government holdings.

Now the Chinese Government in Beijing (via News Daily report citing a State Council statement) has announced that it will allow two provinces sharing land borders with ASEAN member countries to trade in yuan currency to boost its exports , which have been hit by the global financial crisis.

The mainland's trade with Hong Kong, Macao and ASEAN nations has risen rapidly to reach US$402.7 billion last year, equivalent to some 20% of China's total overseas trade. China / ASEAN trade has been booming this year - "The figure is expected to top US$ 200 Bn. in 2008, two years earlier than our expectations," said Zhang Xiaoqin, secretary general of China-ASEAN Expo Secretariat in October.

Yuan trade will be permitted between southwestern Yunnan province and the southern Guangxi Zhuang autonomous region and Association of Southeast Asia Nations (ASEAN - 10 member states) members Myanmar, Laos and Vietnam. Guangxi Zhuang is being developed as a land and sea gateway into ASEAN which has a free trade agreement China.Its capital, Nanning, is the permanent site for the annual China / ASEAN trade expo since 2004. The fourth CAEXPO was held in October 2008 with 3,00 trade booths..

Apparently beyond this bald announcement no details of starting date etc., has been made but it is seen as a first step to making the yuan an international currency.

Zhao Xijun, Renmin University finance professor is quoted , "The move will mitigate the risk of exchange rate fluctuations for Chinese exporters and their trade partners," Zhao Xijun, Renmin University finance professor, was quoted as saying.

China and the 10 ASEAN members are speeding up the tariff reduction to facilitate the establishment of already agreed China-ASEAN free trade zone.

China's average tariff on ASEAN countries' goods was slashed from 9.9 % to 5.8 % now and will continue to drop to 2.4 % in 2009, and finally in 2010, the scheduled time for the establishment of the free trade zone, 93 % of products from ASEAN countries will be tariff-free.