HONG KONG: The overseas expansion of China’s yuan is taking giant strides towards Western Europe, with two clearing banks assigned for the region in the past week — the first time yuan clearing banks have been operated outside of Asia.
The move is set to breathe new
life into Europe’s yuan trade,
which is expected to see faster accumulation of yuan deposits and
a boom in products linked to the currency.
It took almost 10 years for China to set up another yuan clearing bank after Hong Kong, yet clearing banks began to spring up in the past year as Beijing stepped up efforts to facilitate yuan usage in trade settlement and investment among global investors, with London and Frankfurt as the first West European locations.
China’s central bank said last Thursday it had designated Bank of China to offer a yuan clearing service in Frankfurt, following an announcement a day earlier that China Construction Bank was selected to provide the same service for London.
Adding to the momentum is the direct trading between the yuan and the sterling, which started last week, given that sterling is a very actively-traded currency and London already takes more than 20 per cent of yuan forex trading.
As China hastens its steps to establish the “redback” into foreign corporates and investors, it is reasonable to expect more such clearing banks being appointed in the near future and ideally in the American time zone.
Chinese media reported that the Canadian government is studying how to set up a yuan clearing centre with the private sector, and hopes to see some progress later this year. Reuters