"The upcoming CAFTA, which boasts the largest population among all the world's FTAs and allows zero-tariff on 90 percent of products traded between China and ASEAN, will quicken the process of RMB regionalization, "Xu Ningning, executive secretary general of China-ASEAN Business Council, told Xinhua at the 6th China-ASEAN Expo in Nanning, capital of Guangxi Zhuang autonomous region.
Free trade demands free flow of currency, making possible the regional use of RMB, he said.
The expo, held from Oct 20 to 24 ahead of the operation of FTA to embrace free trade and mutual investment, attracted state leaders, high-ranking officials and entrepreneurs from inside and beyond the ASEAN region.
Alongkorn Ponlaboot, deputy minister of commerce of Thailand, believed RMB would play a more important role in bilateral trade between China and ASEAN in the future.
He said yuan was a very stable currency and expanding its use could help reduce risks faced by the ASEAN countries in using the US dollar, which has become highly volatile as a result of the global financial crisis.
Pung Kheav Se, general manager of Canadia Bank Plc of Cambodia, echoed Thailand's deputy minister, saying trade between China and ASEAN kept growing and less risk by the use of RMB would benefit both sides.
Data from China's General Administration of Customs showed trade between China and ASEAN totaled $105.88 billion in 2004, and rose to $231.07 billion in 2008. China and ASEAN are currently the fourth largest trade partners to each other.
Challenges and efforts
However, the use of yuan in ASEAN fell far short of the trade growth bewteen China and ASEAN. Currently RMB settlement was mainly adopted in border trade which accounted for only 10 percent of the China-ASEAN bilateral trades, Teng Chong, board chairman of Guangxi Beibu Gulf Bank, told Xinhua.
Pung Kheav Se said currently RMB, US dollars, Thai Baht and Vietnamese Dong were in circulation in Cambodia, but the amount of yuan was small, mainly used for tourism and small commodity business. He did not give specific figures.
The main reason was that Cambodia was not a developed economy and some people had inadequate knowledge about yuan, he said, suggesting China should gradually establish credit system and settlement mechanism of yuan in ASEAN, and then expand its use globally.
Su Ning, vice governor of China's central bank, said financial cooperation between China and ASEAN was still at the initial phase and financial markets were not open enough. But potential for cooperation was huge as finance in China and ASEAN seeing fast development currently.
China has been launching pilot RMB programs over the years, but the pace has obviously quickened since the onset of the global financial crisis as the US dollar has been getting weaker, arousing concerns that an unstable dollar would lead to increased costs and risks for traders.
Last December, China announced pilot programs to settle trade deals in yuan between the country's two economic powerhouses, Guangdong Province and the Yangtze River Delta (which includes Shanghai) and the two special administrative regions of Hong Kong and Macao. A similar arrangement was proposed for exporters in Guangxi and Yunnan province in southwestern China to settle trade in yuan with ASEAN.
In April, China announced a pilot program to settle cross-border trade deal in yuan in five cities including Shanghai, Guangzhou, Shenzhen, Zhuhai and Dongguan.
Currently, China has sealed cooperation agreements of bilateral trade settlement with the central banks of Laos and Vietnam in ASEAN.
Expect wider RMB use
A Vietnamese furniture trading company named Vietnam Charity Trading Company Ltd had attended the expo for five years. It began trades with China 22 years ago and has been exporting 70 percent of its prodcuts to China.
The company buys materials from Laos and sells products to China and other countries, in which dollars, yuan and Vietnamese Dong are adopted. "That makes the process very complex and always results in losses because of the fluctuation of exchange rates," said Huang Yifan, executive director of the company.
"I really hope there is a single currency like the euro to cut off the cost of exchanging currency and make the whole process easier," she said.
"I hope yuan could be the one as it has been stable and welcomed by the ASEAN people," she said, adding that yuan is very popular in Vietnam, Cambodia and Laos.
Grace See Choo, managing director of Grace Cosmetics, a Malaysian cosmetic company, said her company had been importing packing materials from China since 2000. "We always traded in yuan, which operates well," she said.
"China is a huge market for us. Guangxi's market alone is larger than that in our whole country. We prefer yuan as the trading currency if the Chinese part want the same," She said. The company now is looking for a Chinese agent to explore Chinese market.
Although yuan had gained reputation among ASEAN people, efforts of the ten nations' central banks were still necessary to commit to a consensus of popularizing RMB, Teng Chong said.
Xu Ningning said new economic situation had created stage in Asia for RMB. The three FTAs between ASEAN and China, Japan and the Republic of Korea, respectively, will build a wider platform for RMB exchanging.
"Although it needs time to breed a new trade market or a new currency market, the CAFTA is believed to create new space for the regionalization of RMB," Xu said.