According to Reuters:
A northeast Chinese border city that is a key portal with isolated neighbour North Korea has launched a pilot scheme to settle export deals in China’s yuan currency, the city’s official newspaper said on Thursday.
North Korea’s struggling economy has come under greater strain after a chaotic attempt to re-denominate its currency last year hurt private traders and alarmed Chinese merchants.
The yuan’s trial use appears intended to boost Chinese exporters’ confidence in doing more above-the-table deals with the North, often a perilous gamble even in smoother times.
Many Chinese traders doing business with the North already use the yuan, dollar, euro in cash or even barter to settle export of food, clothes, appliances and other cheap goods in often informal or convoluted transactions. Smuggling and illicit deals are common along the border, marked by the Yalu River, a few dozen metres (feet) wide in many parts.
The Dandong Daily reported that approved exporters in Dandong will be able officially to carry out business in yuan.
The Chinese government announced in June that all of its trading partners would be able to invoice and settle imports and exports in yuan, but so far such transactions have been primarily confined to trade between China and Hong Kong.
“This means that state-designated export businesses in Dandong that engage in external trade can use the renminbi to settle transactions,” said the Chinese-language Dandong Daily (www.ddrb.cn) of the scheme, which began on Wednesday.
The renminbi is another name for the yuan.
“This will reduce exchange rate risks and the costs of doing business, and smooth out enjoying export tax rebate policies, as well as improving capital utilisation,” said the report.
The scheme will also cover approved small-scale exports passing through customs posts at Dandong, it said.
The new scheme will allow exporters to enjoy rebates and other benefits for trade, but will also depend on North Korean importers being allowed to deal legally in yuan.
Dandong lies on the Yalu, and at night its neon-lit riverfront faces the darkness of the electricity-starved North.
…
North Korea’s dependence on Chinese goods and aid has deepened as Pyongyang’s ties with South Korea have frayed.
According to Chinese customs data, in the first six months of 2010, China’s trade with North Korea was worth $1.3 billion (835.6 million pounds), a rise of 15.2 percent on the same time last year.
China’s exports to the North grew by a quarter, but its imports fell by 4.8 percent, the customs data show. As much as 70-80 percent of that trade passed through Dandong, according to earlier Chinese news reports, citing local customs officials.
Read the full story here:
China city launches yuan trade scheme with North Korea
Retuers
8/19/2010
