FTZ to allow cross-border yuan payment
2014-02-19 15:10:53
The Shanghai Head Office of the People's Bank of China (PBC), the country's central bank, kicked off yuan-denominated cross-border payment in the newly established Shanghai free trade zone (FTZ) on Tuesday, facilitating people who purchase items from online shops overseas.
The Shanghai Head Office of the central bank said Tuesday that Allinpay, 99Bill, China Pay, Dongfang Electronics and Shengpay are now allowed to process cross-border payments in the Chinese currency for cross-border trade in the China (Shanghai) Pilot Free Trade Zone.
The Shanghai FTZ, located on the outskirts of the city where the Yangtze River empties into the East China Sea, was launched in September 2013 to spearhead the yuan's international use and financial liberalization, among other reforms to support free trade.
Under the program, the five payment firms will each open a cross-border yuan account at the Shanghai branches of Industrial and Commercial Bank of China, Bank of China, China Construction Bank, China Merchants Bank and China Minsheng Bank to park provisions for cross-border yuan payment.
The new service eliminates the need to undergo the currency exchange procedure, and will enhance online shopping experience on offshore websites for regular Chinese shoppers, according to Chinese media reports.
More Chinese people have opted to shop directly on foreign brands' websites in recent years, creating a need for cross-border e-commerce payment services.
The move is the first of a slew of concrete measures expected in the pipeline after the central bank announced in December a 30-point guideline supporting financial liberalization in the Shanghai free trade zone.
According to the central bank's guideline, companies that have online payment service licenses and are either incorporated in Shanghai or run subsidiaries in the free trade zone can provide yuan settlement for cross-border trade of goods and services.
According to global transaction services organization SWIFT, the yuan climbed to become the eighth most-used currency for payment in December and overtook the euro as the second most-used currency for trade finance in October.
The market share of yuan usage in the traditional financial trade grew to 8.66 percent in October 2013 from 1.89 percent in January 2012, according to the latest data from SWIFT in December.
The yuan only ranks behind the US dollar, which remains the leading currency with a share of 81 percent. The euro has retreated to third place with a market share of 6.64 percent in October.
The top four countries using the yuan for international financial trade were China, Singapore, Germany and Australia, SWIFT said.