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Competition fierce to be first non-A
Source: www.satmytech.com   Publish Time: 2014-03-31 08:16   4667 Views   Size:  16px  14px  12px
Competition fierce to be first non-Asian yuan settlement service Britain and China will sign an agreement on Monday to work on setting up the first clearing and settlement service for renminbi trading outside Asia, Britain's Treasury said on Wednesday in a statement. Financial sector experts in London have welcomed the news, hailing it as a milestone in boosting London's advantage in the contest to become the Western hub for offshore renminbi transactions. RMB clearing bank in London within sight France leads eurozone in offshore RMB payments "This is a positive step and is further evidence of the strong links between the UK and Chinese central banks and the public sector," said Spencer Lake, global head of capital financing at HSBC. Lake said having an official clearing bank will help London's financial market to build up renminbi transaction volumes, which will help with the internationalization of the Chinese currency. "We expect the currency to be fully convertible in the next two to three years under the capital account and subject to the success of China's overall reform plans," Lake said. An official clearing service facilitates the efficient clearing of offshore renminbi transactions, achieved through direct cooperation between a commercial bank in London appointed for this purpose and the People's Bank of China. Having an official clearing bank also allows more liquidity for the offshore renminbi center that hosts the bank. Moreover, it bears symbolic significance for the offshore renminbi center in that it has recognition from the Chinese government. The announcement came amid fierce competition between different European financial centers, including Paris, Frankfurt and Luxembourg, to become the top destination for offshore renminbi transactions. For example, Luxembourg Minister of Finance Pierre Gramegna said in February that he will put forward the request for Luxembourg to have an official clearing bank when he visits China in June.

Liberalization policies are creating opportunities for overseas financial institutions and their clients, reports Wu Yiyao from Shanghai

Since the China (Shanghai) Pilot Free Trade Zone was launched in September, there's been an increasing number of bank opening ceremonies, and executives of foreign banks said that as more detailed guidelines are released, business has been picking up.

Since March 1, there's been no interest rate ceiling on foreign currency deposits of up to $500,000, whether held by companies or individuals.


Foreign banks will need niche to prosper in FTZ
Foreign banks will need niche to prosper in FTZ
And according to the People's Bank of China, companies based in the zone may borrow offshore yuan.


There's certainly plenty of competition, bankers said, but with the vast demand in the zone, lenders should be able to find a market niche.

"I think there's ample market demand in the zone, and each player may have its own strengths. Competition is good for clients, and we are looking for a win-win-win situation for lenders, clients and the market," said Andrew Au, chief executive officer of Citi China and chairman of Citibank (China) Co Ltd.

Unlike branches of Chinese lenders in the FTZ, foreign banks' facilities are less crowded. Indeed, some are essentially deserted.

"It's not that we have less business than Chinese lenders; it's simply because foreign banks may attach more importance to corporate finance, a business that clients can do over the Internet. There is less on-site, face-to-face contact," said an employee at a foreign bank outlet in the FTZ.

Foreign banks are probably eyeing the expanding trade that will be conducted through the FTZ. Those transactions will increase demand for cross-border financing, said Jimmy Leung, a banking specialist at PricewaterhouseCoopers.

Access to global networks will help foreign banks leverage their FTZ presence to forge links between the zone and foreign markets, helping clients capture new growth opportunities, bankers said.

The FTZ is a milestone in China's efforts to build an international financial center in Shanghai and reform the economy for longer-term viability, said Neil Ge, DBS Bank (China) Ltd's chief executive officer.