China awarded Germany a quota of 80 billion yuan ($12.9 billion) that will allow domestic investors to buy securities in China under the Renminbi Qualified Foreign Institutional Investor program.
The quota was announced during a visit by Chancellor Angela Merkel to China to meet Premier Li Keqiang and President Xi Jinping, according to a Chinese government website statement today.
The allocation follows similar arrangements for Paris, London and South Korea, which also have obtained investment quotas of as much as 80 billion yuan, as Asia’s biggest economy seeks a deeper integration with international markets.
Strict regulations currently make it difficult to invest in Chinese companies. Frankfurt, Germany’s financial capital, wants to build an offshore trading center for the Chinese currency after the European Central Bank agreed to a 350 billion-yuan swap line last year and the Bundesbank in March agreed to cooperate in the clearing and settlement of renminbi transactions with the People’s Bank of China.
“We have to be realistic here,” Bundesbank board member Joachim Nagel said at a conference in Frankfurt, when asked if he was disappointed by the amount China authorized. “We are in competition with other countries in Europe,’
If Germany manages to fill the quota relatively quickly, ‘‘I think the Chinese side is also ready to think about increasing the quota,’’ Nagel said.
Representatives of the Bundesbank, the State of Hesse Economy Ministry, and banks based in Frankfurt including Deutsche Bank and DekaBank Deutsche Girozentrale met in Frankfurt today to discuss steps to promote an offshore hub for the renminbi, the official name of China’s currency.
They’re also keen to establish the fixing of a reference price for offshore yuan in euros in Frankfurt, where the ECB and the Bundesbank are based, Robert Koller, a partner at Simmons & Simmons LLP law firm, said in a telephone interview. Koller heads a working group to advance the Frankfurt renminbi initiative.
‘‘The establishment of a reference rate between the euro and the offshore renminbi would make sense for the further development of a renminbi hub in Frankfurt,” he said.
Such a fixing would provide a reference for investors on the exchange rate between the euro and the offshore yuan as well as “facilitate valuation and introduction of new products significantly,” according to Koller.
Deutsche Boerse has an interest in taking a role in the fixing, Andreas Preuss, vice-chairman of the board of management at Deutsche Boerse AG, said at the same conference. He declined to specify any time for the start of a possible benchmark.