Forward settlements in China's currency accounted for less than two percent of the country's total trade volume, said a senior official with the China Banking Regulatory Commission.

Zhang Guangping, director of the agency's department for coordination of supervision and administration of business innovation, made the remarks in a forum held last week in Fuzhou, East China's Fujian Province.

China's foreign trade volume topped US$1.76 trillion in 2006.

"China's RMB forward settlement transaction volume totaled no more than US$9 billion in 2003, representing merely 1.06 percent of the year's trade volume," Zhang said.

"The proportion reached around 1.5 percent in 2004 and 2005 while the world's transaction volume for forward settlement accounted for 150 percent of global trade volume, which means that the business has huge potential in China."

The narrow fluctuation range of the foreign exchange rate and a lack of experience in hedging - compensatory measures to counterbalance possible losses - are the main factors in this phenomenon, Zhang said.

China dropped its currency peg to the US dollar in July 2005 and linked the yuan to a basket of foreign currencies, allowing it to float up to 0.5 percent daily.