On February 3, 2012 the People’s Bank of China (“PBC”), Ministry of Finance, Ministry of Commerce, General Administration of Customs, State Administration of Taxation, and Banking Regulatory Commission jointly issued the Circular on Issues Concerning the Administration of Enterprises Settling Goods Export in RMB (yinfa[2012] No. 23). This notice eliminated previous restrictions requiring domestic exporters to obtain PBC designations before conducting RMB trade settlement. Under the new rule, all Chinese companies with import and export qualifications are allowed to settle their goods exports in RMB. This is considered a giant step the Chinese government has taken recently to internationalize its yuan currency. Prior to this new rule, only those companies who received desginations from PBC may settle export of goods in RMB.
Now, instead of having a list of companies authorized to conduct RMB settlement, there is a blacklist system, which will be updated each year. Those that have been in significant violations of customs, trade, tax and final laws and regulations in the past two years will be put on the blacklist. Companies on the blacklist will be subject to close scrutiny and more restrictions on their RMB settlement. Until blacklist names are approved by the authorities, the designation restrictions remain in force.
Many foreign companies may now prefer RMB settlement when trading directly with Chinese companies. Invoicing and paying in RMB may shield them from the exchange rate turbulence, and simplify transferring procedures.
