Business / Markets

Bank of China gets yuan mandate in Frankfurt

(China Daily) Updated: 2014-06-20 08:46

The central bank said on Thursday that it had designated Bank of China Ltd as the first yuan-clearing service bank in Frankfurt, the latest step in the nation's drive to bolster international use of the currency.

The move came a day after China Construction Bank Corp was designated as the first yuan-clearing bank in London.

In a statement on its website, the People's Bank of China appointed Bank of China as the first bank in the euro area able to clear payments in the Chinese currency.

The selection of the lender's Frankfurt branch will help Germany's financial capital become a hub for yuan trading, experts said. The German and Chinese central banks agreed on March 28 to cooperate in the clearing and settlement of transactions in the yuan.

Since March, three issuers have sold yuan-denominated debt in Frankfurt.

"The reason for Frankfurt to facilitate euro-area trade is because it is the center for the European Central Bank. And in exactly the same way, London is the sterling center and the link is between sterling and the renminbi," said Andrew Main, managing partner of Stratton Street Capital LLP.

During Premier Li Keqiang's visit to the UK this week, China Construction Bank, the country's second-largest lender, clinched a deal to become UK's first clearing bank for the yuan. London is also aiming to become the leading Western center for the offshore yuan trade.

The PBOC said on Wednesday that the Chinese currency will be traded directly against sterling in the interbank foreign exchange market, a new step to facilitate investment and bilateral trade between China and Britain.

London, which dominates the $5 trillion a day global foreign exchange market, accounts for two-thirds of all renminbi payments outside of the Chinese mainland and Hong Kong, according to UK Chancellor of the Exchequer George Osborne.

Osborne also said on Wednesday the increasing importance of the yuan could lead to a "historic shake-up" of the global financial system, and he wants the United Kingdom to play a central role.

Financial centers such as London, Frankfurt, Luxembourg, New York, Paris and Singapore are competing to become the top offshore yuan hub as China promotes the use of its currency in international trade.

Bank of China gets yuan mandate in Frankfurt

Bank of China gets yuan mandate in Frankfurt

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