BEIJING: Prior to the success of her high-end furniture shop, Luo Xiaoli was in a constant struggle coping with currency exchange.
Luo opened her specialty store in Dongxing city ten years ago, selling mahogany furniture from Vietnam. The wild popularity of the highly aesthetic, quality products made her store an instant hit, but the “hideous procedures” of changing Chinese renminbi into Vietnamese Dong remained a constant headache.
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Exchanges between the two countries’ currencies had to be conducted via the US dollar in local banks, contributing to traders that provided illegal services of direct renminbi-Dong exchanges in the cross-border region.
“When paying my Vietnamese counterparts, I had to turn to these unsafe ‘individual stall banks’ that had low interest rates, because local banks just did not handle such services,” Luo said. The lack of direct currency exchange largely hampered the businesses of many individual store owners like Luo.
Owing to lack of supervision, border merchants and tourists were likely to be cheated by private currency traders with counterfeit money.
“These ‘bank stalls’ challenged the country’s foreign exchange management,” said Pan Yong, a professor with Business School of Guangxi University.
The situation took a U-turn in late 2013, when China launched a series of pilot financial reforms in a host of border cities in south China’s Guangxi Zhuang autonomous region, including Dongxing, as it sought to boost businesses between the country and the Association of Southeast Asian Nations (ASEAN).
Though unknown to many Chinese, Dongxing has become bustling city thanks to its geological conditions. Located on the China-Vietnam border and adjacent to the Vietnamese city of Mong Cai, Dongxing has seen a boom in cross-border trade in recent years as China-ASEAN trade gained momentum.
The pilot programs pioneered direct convertibility of the renminbi and the Vietnamese Dong in Dongxing. Such service was officially launched in April last year, with a currency trading center established there, providing a more secure and convenient way to exchange money.
Following the reforms, total volume of renminbi-Dong exchanges reached a record 81.2 million yuan ($13.1 million) as of March 2015, latest statistics showed.
Meanwhile, cross-border settlement via the renminbi also experienced a boost thanks to the programs that streamlined the procedures. Official figures showed that between late 2013 and March 2015, settlements conducted via the renminbi reached 25 billion yuan, also a record high.
“Renminbi settlement was extremely complicated and time-consuming in the past because there were so many credentials to be checked,” said Tran Le Thuong, a Vietnamese businesswoman operating in Dongxing.
Experts believe the Guangxi reforms will effectively contribute to President Xi Jinping’s Belt and Road initiatives, which include expanding bilateral currency swaps.
“The financial reforms on the China-ASEAN border were aimed at forming a trade and investment mechanism that centers on the renminbi,” said Huang Zhiyong, deputy dean of the Guangxi Academy of Social Sciences.
“The programs not only help make the renminbi more international, they also facilitate trade and investment between China and the ASEAN,” he added.
Huang said more similar reforms can be expected in the future to ramp up border businesses.
