Shanghai is set to be among the first to implement a pilot program to settle overseas trade using the Chinese RMB yuan to consolidate its international financial hub position, the Shanghai Financial Services Office said recently.
Shanghai is laying the groundwork as the city government attaches a high importance to the issue and the city is poised to be among the first batch of places to run the trial program, the office said.
“I am sure I can give you clearer details soon,” said Fang Xinghai, director of the office.
The Chinese State Council (“the Cabinet”) has recently allowed the yuan to be used for settlement of trade between Guangdong Province and the Yangtze River Delta, the Chinese mainland’s two economic powerhouses, and Hong Kong and Macau.
The Cabinet also said Yunnan Province and the Guangxi Zhuang Autonomous Region will also be allowed to use the yuan in settling trade with members of the Association of Southeast Asian Nations (ASEAN).
Using the yuan as a settlement currency for international trade is a step forward to internationalizing the currency and will also boost Shanghai as an international financial hub. The city is a magnet for overseas financial players, home to the China headquarters of giants such as HSBC and Citigroup. The city also holds the mainland’s bigger stock market, biggest futures market, gold, currency and interbank markets.
The office earlier said it planned a trial program to expand the tax-free bonus for high-caliber talents at newly setup financial institutions to those who are already working in the city. The move aims to attract highly qualified financial professionals who shun Shanghai due to higher individual income tax rates, compared to Hong Kong or Singapore.
Shanghai used to refund part of an individual income tax to eligible financial talents before 2006.
