On April 8, 2009, the State Council Executive Meeting decided to launch cross-border trade RMB settlement pilot projects in Shanghai and four cities in Guangdong Province: Guangzhou, Shenzhen, Zhuhai, and Dongguan. Small border trade has moved towards general trade with huge market scale. As an international settlement currency, RMB has officially begun to perform the monetary functions of pricing and settlement in international trade, which has effectively promoted the pace of RMB internationalization.

1. Policy background for RMB settlement of cross-border trade

As early as the 1990s, my country and relevant neighboring countries began to use RMB for settlement in border trade. So far, my country has signed agreements on local currency settlement of border trade with the central banks of eight countries: Vietnam, Mongolia, Laos, Nepal, Russia, Kyrgyzstan, North Korea and Kazakhstan. As my country's economy continues to open up to the outside world, the scale of my country's import and export trade has rapidly expanded and it has become the world's third largest trading country. There is an urgent need for RMB settlement to expand from border trade to general trade. At the same time, with the rapid development of economic and trade exchanges between the mainland and Hong Kong and Macao, there is an increasingly strong demand for trade settlement in RMB between the two places.

Since the outbreak of the international financial crisis, as the most important settlement currencies in international trade, the exchange rates of the U.S. dollar and the euro have experienced dramatic fluctuations. In this context, my country's import and export enterprises generally hope to use the relatively stable currency RMB for pricing and settlement, thereby avoiding the exchange rate risk of using US dollars and euros for pricing and settlement.

2. The practical significance of cross-border trade settlement in RMB

First, carrying out RMB settlement in cross-border trade will accelerate the process of making RMB the pricing and settlement currency for international market transactions, and enhance the role of RMB in the international market. Purchasing power in the international market will ultimately realize the internationalization of the RMB.

Second, carrying out RMB settlement of cross-border trade will help promote the development of economic and trade relations between my country and neighboring countries and regions and maintain stable growth of foreign trade.

Third, RMB’s participation in international settlement can replace part of foreign exchange receipts and payments with RMB, which will help improve the balance of international payments and reduce the pressure of national macroeconomic control.

Fourth, carrying out RMB settlement of cross-border trade allows enterprises to effectively avoid exchange rate risks, eliminate enterprise exchange costs and related fees for foreign exchange derivatives transactions, help clarify corporate financial accounting, and speed up corporate capital operations. , enhance the international competitiveness of enterprises.

Fifth, the participation of RMB in international settlement will bring new market demand to banks’ international business, which will help improve the overall competitiveness of my country’s banking industry and accelerate the pace of internationalization of the domestic financial industry.

3. Problems faced by RMB settlement of cross-border trade

(1) The lack of choice of currency for pricing and settlement of international trade hinders the scale of RMB settlement

I For a national currency to enter the international market as a pricing and settlement currency for commodity transactions and be widely accepted by market participants, the value of the national currency is required to remain stable or slightly appreciate for a long time, truly reflecting the currency's wealth storage function. From the reform of the exchange rate system in July 2005 to the outbreak of the international financial crisis, the RMB has maintained a steady and rising trend. After the outbreak of the international financial crisis, the value of the RMB has remained basically stable. China's current status as the world's third largest economy and the world's largest foreign exchange reserves provide solid and reliable economic strength and monetary guarantee for my country to maintain the stability of the RMB exchange rate. Compared with the exchange rate performance of the US dollar and the euro, the traditional settlement currencies in international trade, the stable currency value of the RMB provides an indispensable and important condition for it to become the pricing and settlement currency for international market transactions.

But at the same time, we should be clearly aware that China's weak position in the division of labor in the international market has largely restricted the scale of the use of RMB in international trade settlements. In order to avoid exchange rate risks and maintain the purchasing power of currency, participants in the international market all hope to be priced and settled in their own national currency or world currency. Although China's economy has developed rapidly and become the world's manufacturing factory after more than 30 years of remarkable results in reform and opening up, its industrial structure is still in the middle and lower reaches of the international market industrial chain, lacking voice and pricing power in the international market. Against this background, the choice of pricing and settlement currencies for international market transactions is also more in the hands of foreign companies. The scale of RMB participation in international settlements is greatly restricted, and the purchasing power of RMB in the international market cannot be significantly improved, which seriously hinders The internationalization process of the RMB. [page]

(2) The RMB exchange rate formation mechanism is not market-oriented, and the pricing power of RMB derivatives is challenged

From the perspective of foreign exchange market transactions, cross-border trade RMB settlement will be accelerated The formation and development of the offshore RMB market also poses a huge challenge to my country's RMB derivatives pricing power. At present, my country implements capital controls, and the bond market and foreign exchange market are imperfect. The relationship between interest rates, exchange rates and capital flows described by the interest rate parity theory cannot be accurately consistent with the reality. Specifically, domestic private institutions holding net foreign exchange positions face the risk of exchange rate fluctuations and need to conduct forward offset transactions in the foreign exchange market to hedge.

However, due to the fact that the RMB is not freely convertible under the capital account in my country, the degree of marketization of RMB interest rates is not high, and the types of bonds that differ in terms of maturity, risk, liquidity, tax characteristics, etc. are not complete, the forward exchange rate cannot be based on interest rate parity. Price appropriately.

At present, the domestic RMB derivatives market and the overseas RMB non-deliverable forward (NDF) market coexist at the same time. The Chicago Mercantile Exchange (CME) has also officially launched RMB futures and options products. RMB derivatives The attribution of product pricing rights will depend on the rationality of the pricing standards for RMB derivatives. Due to my country's implementation of capital controls and interest rate liberalization, the domestic RMB derivatives market cannot reasonably use interest rate parity as the pricing standard for RMB derivatives. This has led to the lack of price competitiveness in the domestic RMB derivatives market, and the market demand of various economic entities to avoid exchange rate risks has turned to the offshore RMB market, which has greatly restricted the development of the domestic RMB derivatives market and has a huge impact on the pricing power of my country's RMB derivatives. challenge.

(3) The RMB cross-border clearing system is not perfect, and the RMB clearing system needs to be improved

The participation of RMB in international settlement will inevitably put forward higher requirements for the existing RMB clearing system and institutional arrangements. Require. Compared with the US dollar's Federal Electronic Funds Transfer System (FEDWIRE) and the Clearing House Interbank Payment and Settlement System (CHIPS), my country's RMB clearing system and institutional arrangements include clearing rules, clearing bank access, clearing account opening, clearing time, clearing Efficiency and other aspects need to be improved and improved to provide a good platform and institutional guarantee to meet the needs of efficient and convenient cross-border clearing of RMB.

IV. The demand for banking products from cross-border trade RMB settlement

After the implementation of the cross-border trade RMB settlement policy, domestic banks have huge market demand for new business products, which can effectively increase The proportion of bank intermediary business income will reduce the dependence of banks' income sources on deposit and loan interest rate spreads, which will help promote the transformation of the business profit model of the domestic banking industry.

(1) International settlement business needs

Currently, traditional cross-border trade foreign currency settlement by import and export enterprises requires domestic banks to conduct trade transactions with overseas banks through overseas foreign currency account banks. Liquidation of funds. Carrying out RMB settlement for cross-border trade will change the settlement model to one where overseas banks conduct fund settlement under trade with domestic banks through domestic RMB account banks.

The business demand brought about by the change in settlement model is mainly that a large number of overseas banks seek domestic account banks suitable for their RMB fund clearing, allowing domestic account banks to obtain a considerable scale of RMB fund deposits, and at the same time significantly increase RMB funds. settlement volume, and thus bring considerable settlement fee income. In addition, domestic banks will also provide RMB financial management services to overseas peers to increase the income of overseas peers from RMB funds and obtain intermediary business income from financial products.

(2) Trade financing business needs

Currently, on the basis of traditional foreign currency settlement of cross-border trade, banks provide considerable scale of foreign currency financing for import and export enterprises. Carrying out RMB settlement for cross-border trade will convert original foreign currency financing into RMB financing, thus driving a significant increase in the financing demand for RMB funds from import and export enterprises.

Specifically, domestic banks will add new types of financing services to traditional trade financing services, such as providing RMB financing services under letters of credit for import and export companies and providing RMB payment services to overseas banks. and forfaiting transfer business.

RMB is the standard currency of domestic banks. Domestic banks have abundant RMB financing channels, and the cost of funds will be better than that of overseas banks. The existence of inter-bank interest rates objectively creates the opportunity to carry out RMB payment through inter-bank cooperation. and forfaiting transfer to achieve win-win business needs.

(3) Transaction requirements for RMB derivatives

Import and export enterprises carry out cross-border trade settlement in RMB. On the one hand, domestic enterprises can avoid the risk of exchange rate fluctuations and do not have the ability to deal with currency derivatives. demand, but on the other hand, overseas companies face the risk of RMB exchange rate fluctuations and have huge demand for RMB derivatives. To this end, domestic banks will provide RMB derivatives business for RMB capital positions held by overseas institutions to meet their hedging needs. The promotion of RMB derivatives will enable domestic banks to gain substantial RMB exchange and handling fee income.

In addition, by providing structured RMB asset portfolio products, domestic banks not only meet the needs of enterprises for investment and financial management business, but also bring intermediary business income to themselves