It appears that cross-border trade between Hong Kong and mainland China may be settled in yuan as early as next month. [Thanks to Frank Caruso at the Chinatex blog.]
Note the limitations:
The State Council said early in April that it would allow traders in Shanghai, Guangzhou, Shenzhen, Zhuhai and Dongguan to settle their cross-border business in yuan.
In December, the council said Hong Kong and Macau would be permitted to use yuan for the settlement of trade with designated partners in Guangdong and the Yangtze River Delta under a pilot scheme. Mr Zhou said how many mainland enterprises participated in the scheme would depend on the governments of the two delta regions but “there will be at least a few hundred”.
Mr Yam said all Hong Kong exporters and importers could settle trade with their designated mainland counterparts, but the scheme could only be implemented after the PBOC issued administrative guidelines.
One has been reading pronouncements about convertibility since the early 1980s. This writer is still unsure that full convertibility will ever take place, if only because -- without consideration of economic or financial reasons -- convertibility takes substantial control out of the hands of those who have enjoyed it for so many years. This project, at least described by the article, appears to be a beta test.
