Currency reform boosts China-Asean business
Before the success of her high-end furniture shop, Luo Xiaoli was in a constant struggle to cope with currency exchange.
Luo opened her speciality store in Dongxing, in southern China’s Guanxi Zhuang Autonomous Region, 10 years ago, selling mahogany furniture from Vietnam, which borders the city. The wild popularity of the highly aesthetic, quality products made her store an instant hit, but the “hideous procedures” of changing Chinese yuan into Vietnamese dong remained a constant headache.
Exchanges between the two countries’ currencies had to be conducted via the US dollar in local banks, contributing to the rise of traders who provided illegal services of direct yuan-dong exchanges in the cross-border region.
“When paying my Vietnamese counterparts, I had to turn to these unsafe ‘individual stall banks’ that had low interest rates, because local banks just did not handle such services,” Luo said. The lack of direct currency exchange largely hampered the businesses of many individual store owners like Luo.
Because of lack of supervision, border merchants and tourists were likely to be cheated by private currency traders with counterfeit money.
“These ‘bank stalls’ challenged the country’s foreign-exchange management,” said Pan Yong, a professor at Guangxi University’s business school.
The situation took a U-turn in late 2013, when China launched a series of pilot financial reforms in a host of border cities in Guangxi, including Dongxing, as it sought to boost business links with Asean.
Though unknown to many Chinese, Dongxing has become bustling city thanks to its geographic position. Adjacent to the Vietnamese city of Mong Cai, Dongxing has seen a boom in cross-border trade in recent years as China-Asean trade gained momentum.The pilot programmes pioneered direct convertibility of the yuan and the dong in Dongxing. The service was officially launched in April last year, with a currency trading centre established there, providing a more secure and convenient way to exchange money.
After the reforms, total volume of yuan-dong exchanges reached a record 81.2 million yuan (Bt437 million) as of March this year, the latest statistics showed.
Meanwhile, cross-border settlement via the yuan also experienced a boost thanks to the programmes that streamlined the procedures. Official figures showed that between late 2013 and March this year, settlements conducted via the Chinese currency, also known as the renminbi, reached 25 billion yuan, also a record high.
