SHANGHAI: Financial institutions should optimise their products and services to help trade companies better hedge against foreign exchange risks and facilitate the use of the yuan in cross-border settlements, China’s three government departments say in a joint notice.

       Released on by the Commerce Ministry, the People’s Bank of China and the State Administration of Foreign Exchange, the notice stated that small and medium-sized banks should launch more yuan derivative products to meet companies’ differentiated demand for hedging opportunities against foreign exchange risks.

       Cross-border yuan settlements should also take a bigger share in business formats like cross-border e-commerce and procurement, the notice stated.

       The three regulators also stressed in the notice that banks and sponsors should lower the hedging costs for companies, especially the small and micro-sized ones.

       Local governments can also explore the application of special credit, data credit enhancement and public security deposits so that less corporate credit and capital will be used, the notice stated.

       Data from the public domain showed the onshore yuan slid 700 basis points to the US dollar intraday last Thursday, while the offshore yuan dropped more than 600 basis points.

       According to the China Foreign Exchange Trade system, the foreign exchange spot transaction totalled 3.32 trillion yuan (US$493bil or RM2.2 trillion) in the onshore interbank market in April. — China Daily/ANN