CHINA and Russia have signed a currency settlement agreement that will allow companies from both nations to conduct their foreign trade in the yuan or ruble.

Companies from both nations can conduct foreign trade in any freely convertible currency in addition to the yuan or ruble, the People's Bank of China said in a statement yesterday. The use of the two currencies was previously restricted to border trade.

The agreement "will further deepen the financial cooperation between China and Russia and boost the bilateral trade and investment growth," the PBOC said.

Chinese Premier Wen Jiabao is encouraging wider use of the yuan in international trade and investment to curb dependence on the US dollar and to internationalize the currency.

China started allowing the yuan to trade against the ruble in the interbank market in November.