(20 September 2016 – China) China’s central bank has nominated an official renminbi clearing and settlement bank for New York City.
The People’s Bank of China (PBOC) chose the New York City branch of Bank of China as the official clearing bank.
The move fills in a major gap in the currency’s offshore network of 19 other clearing houses around the world including locations such as Hong Kong, London, Singapore, Frankfurt, Paris, Johannesburg and Sydney.
Bank of China’s New York branch is the largest Chinese branch of a foreign bank in the US with more than US$50 billion (A$66 billion) in assets and settlements of international payments equivalent to a quarter of all US-China trade, Bank of China said on its website.
“The establishment of a clearing bank in the US will promote the growth of renminbi activity in the US and help accommodate an increase in volumes and demand for renminbi products and services,” said Timothy Geithner, former US Treasury secretary and co-chair of the working group.
Designated renminbi clearing banks facilitate offshore renminbi trading and cross-border payments because they have special access to China’s onshore foreign exchange market, enabling them to provide liquidity to offshore centres.
So far, only offshore branches of Chinese banks have received the PBoC’s official clearing bank designation, but Mr Li hinted that could change.
“We also welcome those foreign (non-Chinese) banks in New York that meet the eligibility requirements to become clearing banks for Chinese renminbi business,” Mr Li said at a business dinner on Tuesday evening.
The Chinese currency took a hit over the last year, dropping amid a slowdown in the country’s growth, and capital outflows from China. After surpassing the Japanese Yen in the latter half of 2015, the redback dropped below the Canadian dollar to sixth place in a global ranking of currencies used for cross-border payments in the first half of 2016.