France, Luxembourg strike MoU with China on RMB clearing

02 July 2014   Category: News, Asia, China, Global, Europe, France, Luxembourg   By Derek Au

China’s central bank has signed memoranda of understanding (MoU) with its counterparts in France and Luxembourg on establishing RMB clearing arrangements in these two countries.

The People’s Bank of China (PBoC) said in a statement that it will now designate RMB clearing banks in Paris and Luxembourg that will co-ordinate and co-operate in the supervision and oversight of RMB business.

The clearing arrangements in the two countries will help to promote the use of RMB in cross-border transactions by enterprises and financial institutions, and further facilitate bilateral trade and investment, the PBoC said.

The MoU between the Chinese and French central banks follows the grant of an 80 billion RMB (US$12.90 billion) RQFII quota for institutional investors in France. They will be among the first investors in the eurozone to take part in the scheme, which allows overseas investors to directly access Chinese A-shares and RMB-denominated Mainland bonds.

Paris and Luxembourg are among the European destinations competing to become that region’s RMB hub, alongside Frankfurt, London, and others.

The latter appeared to steal a march on its rivals in June, when the PBoC appointed China Construction Bank to become the UK’s first clearing bank for RMB trading.

The UK also signed a 200 billion RMB, three-year bilateral currency swap deal with China last year. London has so far been granted 80 billion RMB of RQFII quota from China.