Australia will press the case for direct conversion between the Australian dollar and the Chinese yuan during high-level talks in Beijing this week, Treasurer Wayne Swan said yesterday.
Swan told a forum on liberalisation of the yuan or renminbi that Australia backed China’s efforts to internationalise its currency and make it a more freely convertible staple of the global financial system.
“In Australia, we understand that this is a move of profound strategic importance for China’s growth,” he said.
“It represents China’s move toward a freely traded currency and toward a fully integrated economy that will very soon lead the world.”
Beijing aims to have 30 per cent of foreign trade settled in yuan by 2015, a threefold increase from current levels. International RMB-denominated trade quadrupled last year to 2.1 trillion yuan.
China has given the semi-autonomous southern city of Hong Kong the task of becoming the global centre of offshore yuan business, but other cities including London are eager to get a piece of the action.
The Reserve Bank of Australia and the People’s Bank of China signed a AUS$30 billion currency swap line in March to support liquidity in Australian dollar-yuan trades.
Australia is the only Western economy along with New Zealand to have done so, but London and Singapore have taken the lead in the race to become an international yuan trading centre after Hong Kong.
Swan, who heads to Beijing today for a three-day visit, said the importance of Asia to Australia’s economy meant it was essential that Australia embraced efforts to deepen the yuan’s offshore liquidity.
“Of course I’ll be discussing a range of issues around internationalisation of the RMB with my counterparts in both Hong Kong and Beijing,” he said.
“This will include the potential for direct convertibility at some stage in the future between the Australian dollar and the RMB for transactions completed in mainland China, without pricing through the US dollar.
“This has the potential over time to help reduce the cost of trade between Australia and China.”
China and Japan started direct currency trading in June, a move expected to save about $3 billion in annual costs tied to using the US dollar in trade transactions, according to Chinese state media.