State-owned Bank of China Ltd (中國銀行) has offered yuan trading to US customers, a sign that Beijing this year might increasingly promote the use of the Chinese currency in major financial centers.
The change at Bank of China announced in a posting dated last month, means that customers can trade in yuan in the US for the first time rather than having to do so in Hong Kong.
The New York branch of China’s fourth-largest bank said it now lets companies and individuals buy and sell the yuan via accounts with its US branches, although US businesses and individuals can also trade the currency through Western banks.
“The authorities are promoting the use of the yuan in international trade and this is another step in that direction and this means we should see the growth of yuan trading in other regional centers across the world,” said Robert Minikin, senior strategist at Standard Chartered Bank PLC in Hong Kong.
The move is seen as another small step to redenominate trade in yuan after persuading Chinese importers and exporters to reduce settling trade in the US dollar and striking trade settlement agreements with Russia, Brazil and other countries.
These efforts have paid off with the yuan deposit base expanding sharply since trade liberalization rules from July last year lead to the emergence of an offshore yuan and yuan-linked instrument market in Hong Kong.
Yuan deposits in Hong Kong jumped to 280 billion yuan (US$42.4 billion) by the end of November last year from just 63 billion yuan at the end of 2009, and with the likelihood of more trade being settled in yuan in other centers, more pools of liquidity could mushroom.
In Singapore, HSBC Holdings PLC has started offering yuan deposits to customers in Singapore with investible assets of more than S$200,000 (US$154,835) and DBS Bank Ltd will offer yuan deposits to customers soon.
“Every step has been a small step. It is with small steps to a more flexible currency, but at their pace and what they are comfortable with. It is also not a shock that the Chinese did this just when they are meeting with US officials,” said David Watt, senior strategist at RBC Capital Markets in Toronto.
While this would bolster trade settlement in yuan, it still has a long way to go before it assumes the status of an alternative reserve currency as Chinese policymakers ultimately control the yuan liquidity taps in offshore markets and investing in Chinese assets is still strictly controlled.
The Bank of China’s Web site, which outlines details of holding yuan accounts, said the bank offers yuan savings, demand deposit and time deposit accounts to business customers in New York and Los Angeles.
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