China has broadened the use of its currency, as it seeks to turn the renminbi into a world currency to compete with the dollar.
Three Shanghai companies agreed to settle 14 million renminbi ($2 million) of import and export contracts in renminbi for the first time Monday.
Chinese and Russian officials have said in recent months that the dollar’s days as the world’s sole reserve currency are numbered. And now China is acting on that view.
Its new settlement program and its issuance of renminbi-denominated bonds overseas are meant to increase the currency’s appeal as a reserve currency.
“This is a first step on the long road towards that target of making the yuan (another name for the renminbi) a global reserve currency,” Nizam Idris, a strategist for UBS in Singapore, told Bloomberg. “That’s probably going to take five years or more.”
The central bank started allowing trade settlements in renminbi last week. “The yuan settlement program will help boost bilateral trade with Hong Kong and Asean nations,” central bank Deputy Governor Su Ning said when that policy was announced, Bloomberg reported.
China’s efforts are making its companies happy.
“Expanding the renminbi usage area and making it more flexible is great news, as we sell a lot to various countries overseas,” Wang Yapeng, a sales manager at Shanghai Electric International Economic and Trading Co., told The New York Times.
“This should also remove the risks associated with currency fluctuations.”
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