Push grows to settle with yuan
A former Chinese central bank adviser has urged a greater use of the yuan between China and Australia as the country seeks a more important role for its currency.
Professor Yu Yongding's comment comes as Treasurer Wayne Swan pushes for direct convertibility between the dollar and the yuan.
He said the main virtue of this arrangement was to reduce transactional costs of trading between the two countries. "We decommission the US dollar as a vehicle money," he said.
Mr Swan said early this year in Hong Kong the international convertibility of the Chinese currency would become more important as the weight of global economic activity shifted to Asia.
"I will reinforce Australia's keen interest in promoting greater use of the renminbi [yuan] for international trade and finance, with the renminbi increasingly important in the Asian century as the weight of global economic activity shifts from West to East," he said.
Professor Yu, who was a member of the monetary policy committee of the People's Bank of China and an economic adviser to the government, said the uptake of the Chinese currency depended on the movement of the yuan.
"When the [yuan] is in the process of appreciation, Chinese importers don't want to use it as the settlement currency," he said, "however, it will be advantageous for Australian exporters to use it as the settlement currency."
Half of all Chinese companies surveyed by HSBC said they are willing to offer better pricing or terms in return for using the yuan to settle trade and 40 per cent of them would be willing to offer discounts up to 3 per cent.
Professor Yu said there should not be many obstacles in concluding a deal with Australia and the move was a positive step for both countries.
"It is a simple case of invoicing and settlement currency, it is not about making the yuan a reserve currency," he said.