Chinese bank launches yuan service in New York.

BEIJING — A state-owned Chinese bank says its
New York City branch has begun offering
accounts denominated in China's tightly
controlled yuan in a move to expand the
currency's global reach.
Bank of China says customers of its Chinatown
branch in New York will be allowed to trade yuan
for dollars and can wire yuan to or from China.
In a statement on its website, the bank said
account holders can exchange up to the yuan
equivalent of $4,000 a day, with a limit of
$20,000 a year; the limits are half those levels for
non-account customers.
"They are trying to expand the scope of people
who can hold renminbi (yuan) and that increases
demand," said Daniel Hui, a foreign exchange
strategist for HSBC in Hong Kong.
Still, Hui said Chinese restrictions on money flows
into and out of the mainland mean foreign
customers who want to trade yuan will be limited
to the Hong Kong market and currency available
there.
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Bank of China's announcement comes ahead of
Chinese President Hu Jintao's visit to Washington
next week. The White House says President
Barack Obama will press U.S. complaints about
China's currency controls that critics say keep the
yuan undervalued, which boosts Chinese exports
and swells the country's multibillion-dollar trade
surplus.
Beijing is trying to reduce reliance on the dollar by
promoting the yuan, also known as the renminbi,
for trade and finance. It is promoting Hong Kong,
a Chinese territory with its own currency, as an
offshore market for foreigners to conduct yuan
business separate from the mainland, which is
kept isolated from global capital flows.
Hong Kong banks began handling yuan
transactions with the mainland last year and the
World Bank and some foreign companies have
sold yuan bonds.
Employees who answered the phone in the
bank's Beijing headquarters Wednesday refused
to give any other details.
China is the world's biggest exporter and the
second-largest economy behind the United
States, but its exporters receive mostly U.S.
dollars for their goods. Being paid in yuan would
help them eliminate uncertainty about exchange
rate changes. It also might help to promote China
as the center of an Asian regional trading area.
China's leaders have said they will eventually let
the yuan trade freely but say relaxing controls too
abruptly would damage its financial system. They
say a rapid rise in the yuan would hurt exporters,
wiping out jobs.
Beijing promised more exchange rate flexibility in
June and the currency has risen by about 3.5%
against the dollar since then. Analysts expect
another 5% gain this year but that is too low for
U.S. manufacturers and others who say the yuan
is undervalued by up to 40%. The U.S. Senate is
considering a measure, already approved by the
House of Representatives, that would allow
Washington to sanction governments such as
China if they are found to be manipulating
exchange rates for trade advantage.
Economists say the process of making the yuan
an international currency on the level of the U.S.
dollar, euro or yen will take years and depend on
factors such as how many foreign companies
want to use it.
China's central bank governor, Zhou Xiaochuan,
called in 2009 for a new global currency
managed by the International Monetary Fund to
replace the dollar for trade and storing reserves.
Economists say such a change is unlikely, but the
comments reflected Beijing's unease about the
dollar, which it uses for the bulk of its trade and
to store an estimated one-half of its $2.5 trillion in
reserves.
"The next big step will be sanctioning and
regulating renminbi trading in other markets
besides Hong Kong," Hui said. "But that won't
happen in the near-term."
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Source: Http://www.usatoday.com/money/world/2011-01-12-chinese-bank-yuan_N.htm