China has launched yuan-denominated cross-border payment services in its first free-trade zone (FTZ), the central bank said, in an effort to facilitate trade and further internationalization of the Chinese currency.
Five companies — AllinPay (通聯), 99Bill (快錢), ChinaPay (銀聯), Orient Electronic Payment (東方) and Shengpay (盛付通) — were given the green light to process yuan payments for cross-border trade in the FTZ, the Shanghai office of the People’s Bank of China said late on Tuesday in a statement.
China set up the FTZ in the commercial hub of Shanghai in September last year, aiming to test financial reforms, including full convertibility of the yuan and cross-border settlement in the currency.
The five companies will each open a cross-border yuan account with the Shanghai branch of ICBC (工商銀行), Bank of China (中國銀行), China Construction Bank (建設銀行), China Merchants Bank (招商銀行) and China Minsheng Banking (民生銀行) to deposit provisions for cross-border yuan payments, it said.
The move followed one of the measures that the central bank stipulated in a 30-clause guideline late last year to support the development of financial services in the FTZ.
It means third-party payment companies do not have to change currencies when handling cross-border payment services, thus eliminating the risk of foreign exchange volatility, state media have reported.
“This is an important step to support the development of the Shanghai free-trade zone, facilitate cross-border trade as well as expand the cross-border use of the yuan,” the central bank said in the Tuesday statement.
Analysts said the launch of cross-border payment services in the FTZ will give small and medium-sized enterprises (SMEs) an access to yuan trade settlement facilities and promote trade.
“[The] platforms will facilitate the trade activities of SMEs and will support the real trade flows, thus facilitating the cross-border RMB [renminbi] business,” economists at Australia and New Zealand Banking Group wrote on Tuesday, referring to the yuan’s other name.