China expects its Renminbi to play bigger role in the world economy

In a move that began earlier this month, importers and exporters in China were able to use the renminbi to settle cross-border trade. China started the pilot scheme of RMB settlement in Shanghai and four other cities in southern China. Foreign banks were also able to buy or borrow yuan from Chinese mainland lenders to settle trade deals in Hong Kong, Macau, and countries in Southeast Asia.

Professor Zhao Xijun, an expert on finance with Renmin University, says the move is an attempt by China to gain exposure to foreign exchange risk and to try to maintain a steady growth of foreign trade.

"The Renminbi is relatively stable compared with the US dollar. Using a stable currency for trade settlement serves the interest of companies both in China and other countries. It is a way to control the risks of exchange-rate fluctuations. "

With a strong Renminbi, China is on its way in promoting its currency to play a bigger role in the world economy. However, it still hasn't hit the fast lane as some have aspired. Mei Xinyu, a researcher with China's Ministry of Commerce says it's the market that will ultimately have the final say on where the RMB goes.

"China has become a major manufacturer that provides different varieties of products to many developing countries and regions. You can also find "Made in China" accounts for a large portion of consumption products in western countries. However, China is far less productive in industries of service and high technology, which is the major barrier for Renminbi to become an international currency reserve."

Mei says China has yet to improve its financial market, including development of foreign exchange and interest rate derivatives markets and opening the market of long-term and short-term bonds. At the same, the RMB should also be facilitated with its own risk management scheme, such as future trading and forward transaction.

Wang Ling CRI news.