CCB looks at renminbi trade move

Guo Shuqing, chairman of China Construction Bank, said his bank, the second largest in China, was exploring offering renminbi-denominated trade finance credit that could make the Chinese currency more widely used internationally.

His voice, the first from the head of a large Chinese bank, joins a chorus from senior government officials on currency matters that together reflect concerns about the stability of the US dollar and several efforts to promote the use of the renminbi more widely.

On the eve of the G20 meeting about two months ago, Zhou Xiaochuan, head of the People’s Bank of China – China’s central bank – published a paper proposing to replace the dollar with an international reserve currency and expanding the use of special drawing rights, a unit of account of the International Monetary Fund.

Mr Zhou’s proposal came after Wen Jiabao, premier, called on the US to guarantee the safety of dollar-denominated Chinese assets. About 70 per cent of the $2,000bn or so in Chinese reserves are in dollar-denominated assets.

In addition, the Chinese have negotiated a series of currency swap arrangements with seven countries – including, most recently, Argentina – which would allow these trade counterparties to settle some trading bills in renminbi. China has agreements with other countries, including Iran, to not use the dollar in their trade.

While most developments have been theoretical, Mr Guo said he was in talks with the PBoC and others to develop the concept.

The Chinese desire to diversify away from the dollar comes as many oil exporters have expressed a similar wish. Venezuela has frequently complained about the dollar and last year Kuwait abandoned its currency peg with the dollar.

Copyright The Financial Times Limited 2009

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