world growth

world growth

Sunday, June 3, 2012

China and Japan start direct yuan-yen trade

For both countries, there will be lesser need for US dollars.

The launch of direct trading between the Chinese yuan and the Japanese yen is expected to considerably facilitate bilateral trade and investment. The move also marks another step to raise the yuan's international role.

Giving fresh impetus to the world's second and third biggest economies, the yen, after the dollar, is now the second major direct trading currency of the yuan.

Japanese Finance Minister Jun Azumi announced the decision in Tokyo, and stressed the cost benefits behind the move.

Jun Azumi, Japanese Finance Minister, said, "It will enhance the usability of both countries' currencies and reinvigorate the Tokyo market."

Experts say it's an important step towards the internationalization of China’s yuan currency.

Prof. Ding Zhijie, dean of School of Banking & Finance, UIBE, said, "It raises the convertibility of the yuan. And I believe the yuan trading will be accepted by more Asian economies as well as the international markets. It will also push forward the internationalization of the yuan."

The direct trading could save the two countries some 3 billion dollars of transaction fees annually. (I wonder who collects this transaction fee)

Zhu Yan, professor of political science & economics, Takushoku University, said, "The new mechanism means trade between the two nations can be settled directly, bypassing the US dollar."

China is Japan's largest trading partner, and bilateral trade reached as high as 300 billion US dollars in 2010. About 60 percent of Japan-China trade is conducted in dollars.

The direct trading will boost bilateral investment, as well as imports and exports. It will bring convenience in business and lead to considerable reduction of risks caused by fluctuation of the dollar's exchange rates on the world market.

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