What is cross-border trade RMB settlement?

On April 8, 2009, the executive meeting of the State Council officially decided to carry out cross-border trade RMB settlement pilot projects in Shanghai, Guangzhou, Shenzhen, Zhuhai, Dongguan and other cities. This will take a key step towards the internationalization of the RMB and is conducive to the gradual improvement of the international status of the RMB. The so-called cross-border trade RMB settlement refers to the import and export trade settlement that is declared in RMB and settled in RMB. Its business types include import and export letters of credit, collection, remittance and other settlement methods.

Cross-border trade RMB settlement means that import and export enterprises do not have a clear feeling except for the change from US dollar letters of credit to RMB letters of credit. The real change lies in the back-office settlement between domestic and foreign banks. For example, an export enterprise in China can request RMB settlement during the negotiation process with overseas buyers, and overseas buyers can issue RMB letters of credit at the payment bank, and then the negotiating bank notifies the seller, and then the delivery, receipt, payment, etc.

The executive meeting of the State Council officially decided on April 8, 2009 to carry out cross-border trade RMB settlement pilot projects in Shanghai, Guangzhou, Shenzhen, Zhuhai, Dongguan and other cities. This will take a key step towards the internationalization of the RMB, which is conducive to the gradual improvement of the international status of the RMB. The formation of Shanghai's multi-functional financial center, especially the improvement of the financial marekt system, will provide basic support for the promotion of the RMB international settlement pilot and the gradual internationalization of the RMB. It will help to enhance the status of the RMB in the international monetary system and become a "pole" in the future international currency diversification.

On August 23, 2011, the People's Bank of China, the Ministry of Finance, the Ministry of Commerce, the General Administration of Customs, the State Administration of Taxation and the China Banking Regulatory Commission jointly issued the "Notice on Expanding the Area for RMB Settlement of Cross-border Trade", specifying that enterprises in Hebei, Shanxi, Anhui, Jiangxi, Henan, Hunan, Guizhou, Shaanxi, Gansu, Qinghai and Ningxia provinces (autonomous regions) can carry out RMB settlement of cross-border trade; enterprises in Jilin Province, Heilongjiang Province, Xizang Autonomous Region and Xinjiang Uygur Autonomous Region can carry out RMB settlement of export goods. The scope of overseas regions has been expanded from neighboring countries to all overseas countries and regions. So far, the scope of cross-border RMB settlement has been expanded to the whole country.