* Step to promote more international trade in yuan
* Potential growth of more yuan-trading centres apart from
* China's tight hold of yuan supply means deposit growth
may be slow
* Banks in Singapore offer yuan trading to customers
By Gertrude Chavez-Dreyfuss and Saikat Chatterjee
NEW YORK/HONG KONG, Jan 12 State-owned Bank of
China Ltd has offered yuan trading to its U.S. customers, a
sign that Beijing this year may increasingly promote the use
of the Chinese currency in major financial centers.
The change at Bank of China announced in a posting dated
Dec. 2010 means that customers can trade yuan in
the United States for the first time rather than having to do
so in Hong Kong.
However, like elswhere, China is keeping a tight rein on
the yuan allowed to circulate beyond its borders, so
individual accounts can only convert around $3,000 a day into
The New York branch of China's fourth-largest bank
said it now lets companies and
individuals buy and sell the yuan via accounts with its U.S.
branches, although U.S. businesses and individuals can also
trade the currency through Western banks.
"The authorities are promoting the use of the yuan in
international trade and this is another step in that direction
and this means we should see the growth of yuan trading in
other regional centers across the world," said Robert Minikin,
senior currency strategist at Standard Chartered Bank in Hong
The move is seen as another small step to redenominate
trade in yuan after persuading mainland importers and
exporters to reduce settling trade in the U.S. dollar and
striking trade settlement agreements with Russia, Brazil and
Promoting the use of the Chinese currency in international
trade has gone from strength to strength in the past year
thanks to a slew of measures taken by authorities.
Cross-border trade settlement in Hong Kong has grown
rapidly from a monthly average 4 billion yuan in the first
half of 2010 to 68 billion yuan in October.
At the same time, Hong Kong's yuan deposit base has
expanded sharply since trade liberalisation rules established
in July 2010, leading to the emergence of a rapidly growing
offshore yuan and yuan-linked instrument market.
The step by the Bank of China, while significant, is a baby
one, mainly because the Chinese government still tightly
controls the amount of yuan circulating outside the country
and maintains trade settlement quotas.
In 2010, China ran a $181 billion bilateral surplus with
the United States, and a total surplus of $183 billion.
Bank of China's website, which outlines details of holding
renminbi accounts, said it offers yuan savings, demand and
time deposit accounts to business customers in New York and
A savings account requires a minimum balance of the
equivalent of $5,000, while the minimum in demand deposit
accounts is $3,000.
The amount of U.S. dollars that can be converted into yuan
per individual account is a tiny 20,000 yuan per day ($3,021)
-- a cap similar to the one existing in Hong Kong -- and means
that the growth in the yuan deposit base would take time.
Yuan deposits in Hong Kong jumped to 280
billion yuan by the end of November from just 63 billion yuan
at the end of 2009, and with the likelihood of more trade
being settled in yuan in other centers, more pools of
liquidity could mushroom.
In Singapore, HSBC has started offering yuan deposits to
customers in Singapore with investible assets of more than
200,000 Singapore dollars and DBS will offer yuan deposits to
"Every step has been a small step. It is with small steps
to a more flexible currency, but at their pace and what they
are comfortable with. It is also not a shock that the Chinese
did this just when they are meeting with U.S. officials," said
David Watt, senior currency strategist at RBC Capital Markets
Chinese President Hu Jintao will visit Washington to meet
with President Barack Obama on Jan. 19. China's foreign
exchange policy will probably be a topic of discussion
($1=6.619 Chinese Renminbi)
(Additional reporting by Julia Haviv in NEW YORK, Kevin Lim
and Catherine Trevethan in SINGAPORE, Editing by Kevin