China formally allowed the use of the yuan to settle cross-border trade Monday, and three Shanghai-based firms completed transactions using the currency.
It is also an important first step toward promoting the yuan as a regional currency and reducing China's dependence on the U.S. dollar.
Of the transactions completed Monday, Bank of China Ltd. settled a deal by a unit of Shanghai Electric Group, a manufacturer of mechanical and electrical equipment.
With dollar-denominated trade financing having dried up globally with the financial crisis, yuan settlement will allow China's highly liquid banking sector to offer finance in yuan and help keep the country's export sector humming.
China's central bank has been keeping the yuan stable against the U.S. dollar for almost a year.
