China Extends Yuan Clearing Network, RQFII Program to Chile

China named its first clearing bank in Latin America and extended a program to invest in the world’s second-largest economy as it intensifies efforts to increase the currency’s global usage.

The People’s Bank of China named China Construction Bank Co. as the yuan-clearing bank in Chile on Monday, and allocated 50 billion yuan ($8.1 billion) in Renminbi Qualified Foreign Institutional Investor quotas. The nations also signed a three-year, 22 billion yuan currency-swap deal, the PBOC said in a statement on its website. Premier Li Keqiang was visiting Chile as part of a Latin America tour that included Brazil, Colombia and Peru.

Chinese officials have called for the International Monetary Fund to include the yuan in its Special Drawing Rights basket at a review later this year. The country is making the yuan more freely usable in order to be included, PBOC Governor Zhou Xiaochuan said in Washington on April 18. The currency failed to qualify in a 2010 review.

“It’s possible other countries in South America will have yuan-clearing banks and RQFII,” said Irene Cheung, a currency strategist at Australia & New Zealand Banking Group Ltd. in Singapore. “I don’t doubt that Brazil could be next. Time is running out for the SDR review, so China should do whatever they want to in the next couple of months.”

The RQFII program, started in late 2011, allows yuan raised offshore to be used to purchase stocks and bonds in China’s onshore markets. With the latest allocations to Chile, the global outstanding RQFII quota is 920 billion yuan, covering countries such as the U.K., Germany and Australia, according to data compiled by Bloomberg. Brazil signed a three-year, $30 billion currency-swap agreement with China in 2013.

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