Push grows to settle with yuan
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.
Frequently Asked Questions about this Article…
Treasurer Wayne Swan has pushed for direct convertibility so Australian and Chinese businesses can invoice and settle trade directly in yuan and dollars, reducing reliance on the US dollar as an intermediary and cutting transactional costs of cross‑border trade.
Using the yuan for settlement removes extra currency conversion steps and fees tied to using a third currency (often the US dollar), which can lower transaction costs for exporters, importers and firms involved in Australia‑China trade.
Professor Yu Yongding is a former adviser to the People’s Bank of China and a former member of its monetary policy committee. He said greater use of the yuan for settlement is feasible, the main issue is movements in the yuan, and that the change is about invoicing and settlement rather than making the yuan a reserve currency.
HSBC found about half of Chinese companies surveyed would offer better pricing or terms to counterparties that use the yuan for settlement, and around 40% said they would be willing to offer discounts of up to 3% for yuan settlement.
According to Professor Yu, Australian exporters could find it advantageous to use the yuan for settlement—particularly when the yuan is appreciating—because it can improve pricing competitiveness and reduce conversion costs.
Professor Yu noted that when the yuan is appreciating, Chinese importers are less likely to want to use it as the settlement currency, which is a factor that affects the overall uptake of yuan settlements.
No. Professor Yu emphasised that arrangements to invoice and settle trade in yuan are about payment and settlement efficiency, not about immediately turning the yuan into a global reserve currency.
Professor Yu said there should not be many obstacles, describing it as a straightforward matter of changing invoicing and settlement currency—an outcome seen as positive for both countries.
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