BOC RMB clearing facility launched

The development of the Australian renminbi market passed another milestone yesterday, when Bank of China was launched as the official RMB clearing bank in Australia.

Last November, the People's Bank of China appointed Bank of China as the official RMB clearing bank in Australia.

At the same time, the Australian Securities Exchange signed a heads of agreement with Bank of China to expand their strategic cooperation to develop the renminbi as a currency in Australian financial markets.

The two organisations are developing an RMB settlement service. This will allow counterparties to use RMB as a settlement currency for trade deals, foreign exchange transactions and investments.

Speaking at yesterday's launch, Reserve Bank governor Glenn Stevens said the direct benefit of the move was that it would more efficiently facilitate transactions between Australian businesses and their mainland Chinese counterparts using the Chinese currency.

"But an official Australian RMB clearing bank also confers some indirect benefits on the Australian financial sector," Stevens said

"In particular, the establishment of the clearing bank helps raise awareness among Australian firms that the local financial system has the capacity to effect cross-border RMB transactions on their behalf. This is important because, over the long run, Chinese firms may increasingly wish to settle their trade with Australian firms in RMB."

Stevens said the RBA had been involved in a number of initiatives aimed at encouraging greater use of the Chinese currency in Australia. Most recently, it was involved in the negotiation of a quota to allow financial institutions based in Australia to invest in approved Chinese securities under the Renminbi Qualified Foreign Institutional Investor Scheme.