Sep 21, 2020 04:03 PM

China Further Cuts Red Tape to Smooth Cross-Border Yuan Payments

What’s new: China will further facilitate yuan settlements in cross-border trade and investment nationwide, according to draft guidelines (link in Chinese) released on Friday, as part of the country’s ongoing efforts to promote the currency’s internationalization and support economic recovery.

The move follows a pilot program last year to cut red tape for qualified firms making yuan settlements in cross-border trade and investments in 18 free-trade zones. China will allow more qualified firms to enjoy the benefits, according to the latest draft guidelines issued by the People’s Bank of China (PBOC) and several ministries.

What’s the background: In recent years, China has been encouraging the use of the yuan in bilateral trade and investment settlements, as global trade friction has increased volatility in foreign exchange markets and the cost of using third-party currencies has increased.

Last year, the cross-border use of the yuan maintained rapid growth despite slowing economic growth, according to the PBOC’s latest RMB Internationalization Report. However, the internationalization of the yuan still has a long way to go given that the currency makes up just a fraction of global transactions and investment.

Tang Ziyi contributed to this report.

Related: China Wants to Make the Yuan Easier to Use in Cross-Border Trade, Investment

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