Deutsche Bank Says China Links Give Germany Edge in Yuan

Germany’s commercial links to China give Frankfurt an advantage over other financial centers competing to become yuan trading hubs, said Deutsche Bank AG co-Chief Executive Officer Juergen Fitschen.

“We have an advantage in Frankfurt, in Germany: We’re by far China’s biggest trading partner in Europe,” Fitschen said in the city yesterday. “The question is if German clients will be ready to use this flexibility and win a competitive edge” by making and receiving more payments in yuan.

Frankfurt, the euro area’s financial capital and home to the European Central Bank, is facing off with Paris, Zurich and London in a bid to win Chinese business for its country’s banks and exporters. China’s push for greater use of the yuan outside the mainland, which started in 2010, and its joining the euro and dollar as a reserve currency will anchor it more firmly in global monetary coordination, Fitschen told reporters.

“We’re preparing ourselves, not just in Frankfurt but also in London and Singapore,” he said. “The largest share of renminbi-denominated trading volumes will be in Asia.”

The yuan is a denomination of China’s currency the renminbi.

Capital market transactions in yuan won’t necessarily take place in Frankfurt and institutional investors are generally based in London, said Fitschen, 64, who is also president of the BdB Association of German Banks lobby group.

While the volume of transactions factored in yuan may double from current levels “very quickly,” investors will witness an “explosion” if China introduces the trading of oil and other commodities in its currency, Fitschen said.

“It’s a good development that, given China’s economic power, the renminbi is established as a third reserve currency,” Fitschen said. “It may take 10 to 15 years for all of us to feel like we got there, but it can’t be stopped.”

Before it's here, it's on the Bloomberg Terminal.