Bank of China’s new if limited yuan trading facility for its U.S. customers is another small step in the direction of internationalizing the currency. It is the first time customers can to buy and sell yuan using accounts at the state-owned bank’s U.S. branches, rather than go through Hong Kong. A limit of 20,000 yuan ($3,000) a day can be bought per individual’s account, the same cap that applies in Hong Kong to limit speculation. Business accounts are uncapped.
Beijing has been pushing its importers and exports to settle trade less in dollars and more in yuan, and allowing the development of an offshore market in the yuan. Cross-border trade settlements in Hong Kong grew from an average of 4 billion yuan a month in the first half of last year to 68 billion yuan in October. China Bank of Construction forecast recently that this number could reach 1.6 trillion yuan a month by 2015. However, the trend is more pronounced in the trade with countries other than the U.S.
Nevertheless, it has helped swell the yuan deposit base in Hong Kong to 260 billion yuan at end-November 2010, and the introduction of markets in the currency and of yuan-denominated financial instruments, including so-called dim sum bonds. Trading in the currency was allowed in Hong Kong last July. Daily trading has now reached $400 million. Given $4 trillion is the total of all daily currency trading, the internationalization of the yuan still has a long way to go, but it is clear where it is headed however cautiously.