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Foreign trade settlements between Hainan and ASEAN countries increased sevenfold

HAIKOU, September 2. /TASS/. The volume of yuan settlements in cross-border trade between China's Hainan and the countries of the Association of Southeast Asian Nations (ASEAN) amounted to 2 billion yuan (about $ 314 million) in January-July 2021. According to the "Hainan Daily", this is seven times higher compared to the same period in 2020. 

Of this sum, 1.64 billion yuan ($ 254 million) fell on the current account between Hainan and ten Southeast Asian countries, and 385 million yuan ($ 60 million) fell on direct investment.

A pilot program for foreign trade yuan settlement was introduced in 2009 in Shanghai and four cities in the southern Chinese province of Guangdong. Afterwards, the Chinese authorities increased to 20 the number of regions where it is allowed to carry out such calculations, the province of Hainan being among them.

Foreign trade partners of Chinese companies can issue a letter of credit in yuan with a Chinese bank and conduct transactions in this currency. This reduces foreign exchange risks, makes pricing more transparent, and opens up the opportunity to trade with Chinese suppliers who do not have access to foreign exchange.

The Island of Hainan is the southernmost province of China which has a logistical advantage in trade with the ASEAN countries. This regional organization includes Brunei, Vietnam, Indonesia, Cambodia, Laos, Malaysia, Myanmar, Singapore, Thailand, the Philippines.

On April 13, 2018, Chinese President Xi Jinping announced the creation of a pilot free trade zone and port on the Island of Hainan. The program aims to involve the island in globalization and international distribution of labor, as well as to lay a top-notch innovation base.