IKEA said its move earlier this year to pay Chinese suppliers in yuan is helping simplify negotiations and lowering currency risks in the rapidly growing Chinese market.

The Swedish furniture retailer historically paid suppliers in U.S. dollars, 'but things are slowly changing,' Raj Rai, who runs IKEA's treasury operations in Asia, said Tuesday. 'The main advantage for our suppliers is that they are paid in the currency in which they incur most of their costs.'

Paying suppliers with proceeds from Chinese sales gives IKEA better visibility into the real cost structure of its suppliers, making it easier for the retailer to help its suppliers improve productivity, he said. China is IKEA's biggest provider of materials and other goods, and about 20% of the company's purchasing budget is spent in China.

'Exchange rates can hide more serious' business issues, Mr. Rai said. 'When currency negotiations are off the table, one can have more straightforward negotiations.