The Bank of China (BOC), China’s largest foreign exchange bank, will transact the first cross-border yuan trade settlement deal Monday, a source with the bank said Sunday night.

The payee would be Shanghai Electric International Economic and Trading Co., Ltd. under Shanghai Electric Group Co., Ltd. and the remitter would be the company’s business partner in Hong Kong.

China last week issued detailed measures to regulate the pilot program for cross-border trade settled in yuan. The rules specified how to make transactions using Renminbi (RMB) to settle trade with Hong Kong and Macao and regional trade partners.

“The service has drawn much attention and many overseas enterprises had been asking us about it months ago. Why? Because cross-border yuan trade settlement could help enterprises avoid exchange rates risks, lock up financial costs and reckon enterprise anticipated profits,” the source said.

“In comparison to convertible currency settlement, it could streamline links and reduce trade cost. It could help enterprises without foreign exchange revenues cut losses from converting foreign exchanges. It could reduce derivative fees in selecting RMB financial products,” said the source.

The BOC Shanghai branch has reached tentative agreements with 11 overseas agent banks on yuan trade settlement deals. Now the agent banks in tentative agreements with the BOC mostly are large banks in Asia and they anticipate remarkable demand on yuan settlement, according to the sources.

“We are in talks with banks in the United States and Europe and get very positive feedbacks. Despite some obstacles in cross-border yuan settlement, the trend is good,” the source said.

VietNamNet/Xinhuanet