Frankfurt Said to Become Yuan Hub as Xi Visits MerkelAngela Cullen
The Bundesbank and the People’s Bank of China will probably sign a memorandum of understanding tomorrow to enable clearing and settlement of yuan trades in Frankfurt, Germany’s financial capital, according to a person familiar with the agreement.
The central banks are set to sign the accord to coincide with a visit by Chinese President Xi Jinping to Berlin, where he will meet German Chancellor Angela Merkel, said the person, who asked not to be identified because the deal isn’t public. The agreement will take Frankfurt, the seat of the European Central Bank, a step closer to becoming a yuan offshore hub.
China is loosening exchange-rate controls in an overhaul of its $9 trillion economy, sparking a race in Europe to win trade in renminbi, which overtook the euro to become the second-most used currency in global trade finance in October, according to the Society for Worldwide Interbank Financial Telecommunication. Paris, which Xi is visiting today as part of a European tour, is also competing to gain the status of offshore trading hub alongside London, Singapore and Taiwan.
The Bundesbank declined to comment on a possible agreement. Two calls to PBOC news department went unanswered after regular business hours.
Chinese authorities have yet to name a bank to clear yuan transactions. The Chinese-German accord would follow the establishment of a 350 billion-yuan ($56 billion) and 45 billion-euro ($62 billion) bilateral swap line between the PBOC and the ECB in October, bolstering access to trade finance in the euro area.
The U.K. Treasury said yesterday that the Bank of England would sign an initial agreement with the PBOC stipulating the cooperation between the central banks on March 31.
German newspaper Handelsblatt reported earlier today that the Bundesbank and the PBOC may sign a yuan-trade agreement tomorrow.