In its continued push to make the yuan a global currency, China’s central bank said Sunday it plans to designate clearing banks for its currency in Paris and Luxembourg, as the two financial centers battle with London to become the leading European offshore yuan-trading city.
The People’s Bank of China announced the move in two separate statements Sunday. It didn’t say when it would designate the clearing banks.
The French and Luxembourg central banks said Sunday they had signed agreements with PBOC allowing for greater cooperation in the oversight of their domestic yuan market.
The weekend moves are the latest salvos in the race to win a major share of business in cross-border transactions in the Chinese currency. Singapore and Sydney are also vying for a significant share of the global yuan market, which is expected to expand rapidly along with China’s fast-growing economy.
On June 18, the PBOC appointed China Construction Bank Co., one of the country’s top-four state-owned banks, to clear yuan-related transactions in London. It became the first yuan clearing bank in a European country.
Opening a clearing bank is a critical step in developing an offshore yuan-based business. The designated banks will be able to supply yuan liquidity in case of a shortage by directly accessing China’s onshore currency market.
The Chinese central bank said that setting up the clearing banks will benefit Chinese, French and Luxembourg “businesses and financial institutions in using the renminbi [yuan] for cross-border transactions and in further promoting trade and investment.”