VietNamNet Bridge – The Chinese Business Association in Vietnam and the Industrial and Commercial Bank of China have proposed to expand the scope of payments in yuan.

The two institutions, in a letter to Vietnamese agencies, say the demand for using Chinese yuan in payment has been increasing rapidly.

As the Chinese yuan is not yet recognized by Vietnamese laws as payment currency in two-way trade, the currency still has been used in transactions, though in an unofficial way.

They estimated that two-way cross-border trade turnover by the end of 2013 paid in Chinese yuan had reached $15 billion.

Therefore, the institutions believe that it would be better to legalize the situation by allowing partners to make payment in Chinese yuan.

If the yuan-validity market is expanded from border areas to the inland area, the State Bank of Vietnam would be able to better supervise capital sources.

The proposal by the Chinese institutions has been forwarded by the Vietnam Chamber of Commerce and Industry (VCCI) to the appropriate agency.

VCCI’s chair Vu Tien Loc confirmed that the proposal was mentioned in the VCCI’s November report about the businesses’ proposals to Vietnamese state management agencies.

Loc declined to comment on the proposal.

Cao Sy Kiem, former governor of the State Bank of Vietnam, also was cautious when asked to comment.

“It is necessary to analyze the issue from many different angles before making decisions,” he said. “First, it is necessary to consider the reliability and the strength of the yuan. And second, the resistance of the Vietnam’s economy.”

“We can only accept the Chinese yuan as currency for making payment if it is ‘safer’ to use the currency than the greenback, and if it is a convertible foreign currency,” he added.

On the strength of the Chinese yuan, Kiem noted that though the currency’s grade has improved significantly since July 2013, jumping to ninth from 21st in 2010 on the list of currencies used in international trade, it is still not powerful enough to become a convertible foreign currency.

Meanwhile, the other economists have immediately voiced their concern about the issue, repeatedly urging the government to refuse the proposal.

They said that in the current two-way trade situation, if the Chinese yuan is used as official currency in payment, Vietnam will suffer.

Dr. Nguyen Quang A, a renowned economist, said Singaporean welcomed the Chinese yuan in two-way trade because Singapore exports more to China than it imports from the market.

Things are different in Vietnam-China trade. “We should not accept the Chinese yuan in two-way trade because the risk is very high,” he added.

Kim Chi