THE Bohai Commodity Exchange announced the launch of cross-border spot trading of iron ore and natural rubber in the yuan currency in Hong Kong on Tuesday, another incremental step to boost the currency’s global use.

    China is promoting the international use of the yuan in trade and investment in order to reduce reliance on the U.S. dollar, and the introduction of commodities trading settled in yuan is likely to lead to yuan-denominated trade financing in the sector.

    “It is not normal to have only dollar settlement in commodities trading and trading in the yuan will be a good complement to that,” said Zheng Yu, vice general manager of the Bohai Commodity Exchange.

    The exchange, which is the first non-banking financial institution allowed to conduct cross-border yuan trade settlement, said it is planning to introduce more products settled in yuan.

    Yuan trade settlement has expanded quickly since it first began in 2009 and the percentage of China’s total trade settled in yuan has risen from 12 percent in 2012 to nearly 20 percent.

    Rapid growth of yuan trade has contributed to the expansion of offshore yuan pool in Hong Kong, which stood at 780 billion yuan (US$128.47 billion) in October, up about 30 percent from the end of last year.

    “The yuan trading service is a very important component of the yuan internationalization process, as transaction value in commodities is much more significant than in the consumer sector,” Zheng said.

    Hong Kong’s Chinese Gold & Silver Exchange Society already has gold trading denominated in yuan. (SD-Agencies)