China encourages direct use of yuan, yen in trade with Japan

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2011-12-26 01:06:48

BEIJING, Dec. 25 (Xinhua) -- Chinese Premier Wen Jiabao Sunday told visiting Japanese Prime Minster Yoshihiko Noda that China is willing to work with Japan in promoting the direct use of their respective currencies in bilateral trade.

China's central bank announced shortly after the Wen-Noda talks to encourage the direct use of Chinese currency RMB, or the yuan, and Japanese yen in cross-border transactions between China and Japan.

The People's Bank of China (PBOC) said on its website that the Chinese and Japanese leaders agreed to strengthen cooperation in the financial markets of the two countries and encourage more bilateral financial transactions.

"As implications from the current global financial crisis continue to spread and the complexity and severity of the world and regional situations are worse than expected, it is necessary and possible that China and Japan join efforts to address the challenges and deepen strategic reciprocal ties," Premier Wen said to Prime Minster Noda at the Great Hall of the People in Beijing.

Wen added that China also hopes to accelerate the process of building a free trade zone among China, Japan and the Republic of Korea as well as to boost East Asian monetary and financial cooperation.

The PBOC said in the online statement that the China-Japan financial cooperation might help reduce risks stemming from fluctuations of foreign exchange rates and transaction costs during trade settlement.

The Chinese central bank said that applications are currently under way from Japan to buy Chinese government bonds, but with little details provided.

The PBOC also encouraged Japan to make direct RMB investments in the Chinese mainland.

The statement said the PBOC supports the development of the direct trading market of RMB and Japanese yen. The PBOC also allows Japanese companies to issue RMB bonds in Tokyo and other overseas markets and approves a trial program of RMB-bonds issuing by the Japan Bank for International Cooperation in the Chinese mainland.

Gao Haihong, an international finance scholar at the Chinese Academy of Social Sciences, said in an International Economic Review paper that Asian nations need to restructure their growth patterns in order to enhance regional trade, investment and monetary cooperation as external demand from markets such as the United States and the European Union falter.

The PBOC said in October that foreign institutional and individual investors would be able to apply for permits to make direct investments in China with the settlement of RMB in line with China laws and regulations.

China encourages direct use of yuan, yen in trade with Japan - Xinhua | English.news.cn

 

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China urges less reliance on foreign credit ratings:thumb:
Updated: 2011-12-25 21:16(Xinhua)

China urges less reliance on foreign credit ratings|Economy|chinadaily.com.cn

BEIJING - China's central bank chief Zhou Xiaochuan on Sunday called on the nation's major financial institutions to enhance their own judgment in making choices and reduce dependence on credit ratings provided by overseas agencies.

Major financial institutions are also urged to clear up certain regulations and policies that are reliant on credit ratings from foreign agencies, said Zhou, who is governor of the People's Bank of China.

"Large financial institutions are different from small ones or retail investors, they should strive to make choices on the basis of their own judgment," Zhou said at an economic forum held Sunday in Beijing.

Zhou also said the global financial markets were largely dissatisfied and doubtful with dominant credit rating agencies through the global economic downturn in recent years, which developed from the US sub-prime mortgage crisis.

Meanwhile, Zhou said the country should support the development of home-grown rating agencies. However, it's a process that will need the accumulation of talents, information, and experiences.

Dagong Global Credit Rating Co., Ltd., the first domestic rating agency in China, unveiled the country's first sovereign credit rating report in July 2010 that evaluated 50 countries. It also became the first non-Western rating agency to assess the world's sovereign credit and risks.

The report was released at a time when many complained that the Moody's Investors Service, Standard & Poors and Fitch Ratings were partly to blame for the global financial crisis as well as Greece's debt woes.
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China, Japan to Back Direct Trade of Currencies

By Toru Fujioka - Dec 26, 2011 12:01 AM GMT+0800

Japan and China will promote direct trading of yen and yuan without using dollars and will encourage the development of a market for the exchange, to cut costs for companies, the Japanese government said.

Japan will also apply to buy Chinese bonds next year, the Japanese government said in a statement after a meeting between Prime Minister Yoshihiko Noda and Chinese Premier Wen Jiabao in Beijing yesterday.

The deals between the world's second and third-largest economies come as the two-year-old European debt crisis keeps global financial markets volatile. Japan will start to buy "a small amount" of China's bonds, a Japanese government official said on condition of anonymity because of the ministry's policy, without elaborating on when and how much of the debt the nation plans to purchase.

"Given the huge size of the trade volume between the Asia's two biggest economies, this agreement is much more significant than any other pacts China has signed with other nations," said Ren Xianfang, a Beijing-based economist with IHS Global Insight Ltd.

Finance Minister Jun Azumi said Dec. 20 buying of Chinese bonds would be beneficial for Japan because it would help reveal more information about financial markets in China, the world's largest holder of foreign currency reserves.

Biggest Trading Partner

Encouraging direct yen-yuan trades will aim to reduce currency risks and trading costs, Japan's government said. Currently, about 60 percent of trade transactions between the two nations are settled in dollars, according to Japan's Finance Ministry. China is Japan's biggest trading partner.

Then-finance minister Noda said in September 2010 that Japan should be able to invest in China's market given that China buys Japanese debt. Japan holds $1.3 trillion of foreign- currency reserves, the world's second largest.

Austria has already been granted the eligibility to buy Chinese bonds, according to the Japanese government official. Central banks from Thailand to Nigeria plan to start buying yuan assets as slowing global growth has capped interest rates in the U.S. and Europe.

Investing in Chinese debt has become easier for central banks as issuance of yuan-denominated bonds in Hong Kong more than tripled to 112 billion yuan ($18 billion) this year and institutions were granted quotas to invest onshore.

China sold the second-biggest net amount of Japanese debt on record in October as the yen headed for a postwar high against the dollar and benchmark yields approached their lowest levels in a year. It cut Japanese debt by 853 billion yen ($11 billion), Japan's Ministry of Finance said on Dec. 8.

Separately, the Japan Bank for International Cooperation, JGC Corp., Mizuho Corporate Bank Ltd., the Export-Import Bank of China and other Chinese companies will establish a $154 million fund to invest in environment-related businesses such as recycling and energy, the Japanese government said.

China, Japan to Back Direct Trade of Currencies - Bloomberg