China to allow RMB to Trade Directly with Euro

China will begin direct trading between its yuan currency and the euro starting on Tuesday, the national foreign exchangemarket's operator said, as Beijing seeks to broaden the unit's global usage.

The China Foreign Exchange Trade Systemalready offers a platform for yuan-euro transactions but direct trading meansthe US dollar will not be used as an intermediary currency to calculate rates,according to a statement released Monday.

The market operator said the move aimed topromote bilateral trade and investment, facilitate the use of yuan incross-border trade and lower conversion costs.

In June, China started direct trade betweenthe yuan and Britain's pound, one of several currencies to be included in astreamlined regime.

China has long had direct currency tradewith the United States, and in recent years has added Japan's yen, the Australiandollar, the New Zealand dollar and Malaysian ringgit.
Beijing keeps a tight grip on the capitalaccount -- investment and financial transactions, rather than those related totrade -- on worries that unpredictable inflows or outflows could harm the economyand reduce its control over it.

But China is seeking greater use of the yuan -- also known as the renminbi (RMB) -- in line with its status as theworld's second-largest economy and to challenge the US dollar, analysts say.

"Direct trading brings together theRMB with the world's second-most actively traded currency and is a significantstep in (the) RMB's globalisation," said Ryan Song, head of markets forChina at British bank HSBC, which is acting as a market maker for the new pair.

"The trade and investment ties between China and the European unio, as two of the world's major economies, can befurther strengthened through the greater convenience of direct trading in thispair," he said in an HSBC statement. (more wonderful news pls enter www.chinainout.com)