China to Set up Currency Clearing Bank in Australia
China is to establish an official currency clearing house in Sydney, Australia, to facilitate trade in the renminbi (RMB) and further open up its economy to Australian businesses.
The leaders of the two countries confirmed the launch at the end of talks on a long-awaited
free trade agreement (FTA)
. “The establishment of an RMB clearing bank here in Australia is very, very good news indeed,” said Australian prime minister Tony Abbott alongside Chinese president Xi Jinping in Australia’s capital city, Canberra.
The central Reserve Bank of Australia (RBA) said it had signed a memorandum of understanding (MoU) with the People’s Bank of China (PBOC) to establish the hub, which aims to help build bilateral trade between the major trading partners.
“The clearing arrangements will provide a more direct means of facilitating cross-border RMB transactions between Australian and Chinese entities than was previously available,” the bank said.
A
ustralian banks welcomed the move, which they said would make it faster and easier for customers to trade and transact in the Chinese currency. “The RMB is expected to dominate Asian trade and could become a genuine rival to the US dollar [USD] as a global reserve currency,” said Mike Smith, chief executive (CEO) of Australia and New Zealand Banking Group (ANZ).
China will also give Australian-based financial institutions (FIs) greater direct investment access to its domestic bond and equity markets via the RMB Qualified Foreign Institutional Investor (QFII) programme, the RBA said.
“(The) announcements will help ensure Australia is prepared to benefit from RMB-related trade and investment opportunities that emerge as China continues to deepen its integration into the global economy,” said government treasurer Joe Hockey.
Mike Baird, the New South Wales premier, who had lobbied for Sydney to be the venue for the hub, said only one per cent of Australian trade with China was currently settled in RMB. Estimates suggest that the Chinese currency will be used to settle 30% of the country’s total trade by the end of 2015.