A lack of yuan derivatives and a short supply of the currency limit the growth of the cross-border trade yuan settlement trial as overseas buyers are not keen to accept it for payment, companies said yesterday.

"Our trading partners are unwilling to accept the yuan as the settlement currency as they expect the yuan to appreciate," said Zhuang Liangming, senior financing manager of Shanghai Electric Power Generation Group, yesterday at the Sino-Swedish Sustainable Financing Forum.

Exporters like Shanghai Electric can benefit from the yuan settlement by avoiding foreign exchange losses when the yuan is rising. For buyers overseas, however, it's the other way round as they have to pay more in their currencies for yuan especially if the Chinese currency rises.

"Buyers have limited sources of yuan and they don't have many avenues to invest in the currency derivative markets after obtaining the (yuan) currency and that's why they choose to turn their noses up at the local currency settlement scheme," Zhuang said.

"It's unlikely that a breakthrough can be made this year to boost the settlement dramatically," he said.

Johan Andren, general manager of Shanghai branch of Svenska Handelsbanken AB, said the yuan faces other barriers against its growth as a global currency because its exchange rate and interest rate are not set by the market.

China introduced the trial program in July 2009 in Shanghai and four cities in Guangdong Province to help exporters cut foreign exchange risks and a bid to boost the yuan globally.

Shanghai Electric's yuan-settlement exports were valued at 220 million yuan (US$32.2 million) last year. Zhuang said he expected the figure to double to 500 million yuan this year.