HONG KONG: One more bank in the city has joined the network of service providers to settle cross-boundary trades using yuan.

Citigroup has signed an agreement with Bank of China (Hong Kong) Limited to participate in the pilot program for settling cross-border trades using renminbi, the US bank's transaction service unit said in a statement yesterday.

Some 15 cross-boundary trades were invoiced in yuan at its official launch early this week. The pilot scheme is seen as the most tangible step in promoting the use of yuan in international trade. More banks are expected to get the license to conduct cross-boundary trade settlements in yuan.

Bank of China (Hong Kong), the sole yuan clearing bank in Hong Kong, said it had signed deals with 10 lenders in the city so far.

Under the agreement with the US bank, Citi is now able to provide trade settlement, trade finance denominated in renminbi and expand its renminbi foreign exchange conversion services to corporate and small- and medium-sized clients.

"This agreement signifies Citi's active participation in this pilot program to settle cross-border trade using renminbi. Many of our clients in Hong Kong and internationally have an increasing need for renminbi-denominated trade solutions," Carmen Ling, Hong Kong head of global transaction services at Citi, said in a statement.

"They (our clients) can now enjoy a complete service that leverages Citi's extensive global experience in transaction services and our local knowledge of the mainland's financial infrastructure."

Su Ning, deputy governor of People's Bank of China, said at the signing ceremony that the yuan settlement scheme would cut exchange-rate risks and boost bilateral trades and stimulate cross-border trades as a result.

Executives at Bank of China (Hong Kong) expected the scale of yuan trade settlement would not be substantial at the beginning, since only about 400 mainland enterprises were allowed to participate.

But the volume could increase at a rapid pace as the number of pilot cities or enterprises could be expanded when all parties become familiar with the arrangement, said Stephen Chan, a deputy general manager at the bank.

According to Citi's Ling, the development of renminbi business in Hong Kong will benefit enterprises on both sides of the border and contribute to economic growth in the region.

"Through this program, we are working to enhance financial cooperation between Hong Kong and the mainland, maintain Hong Kong's status as an international financial center; and, most importantly, help our clients seize opportunities for business success as more international trade is conducted and settled using renminbi," she said.

(HK Edition 07/10/2009 page3)