According to SWIFT’s RMB index, the UK was the leading offshore RMB hub in January 2014, not including China and Hong Kong. The UK accounted for nearly 26% of RMB payments while Germany ranked 8th with its 3% share. 

The competition for becoming the first renminbi (RMB) clearing hub outside of Asia has been fierce. Now, two countries have signed agreements with the People’s Bank of China (PBOC) - the German Bundesbank signed a memorandum of understanding with the to establish RMB clearing services in Frankfurt, and the Bank of England signed a similar memorandum.

According to bankers, companies can now expect costs associated with RMB payments to be lower since they can be processed in Germany or the UK. The agreement is also expected to ease the use of RMB capital markets products such as dim sum bonds for European companies. 

The clearing banks for the Chinese currency have yet to be selected in either city. This task will be left up to the PBOC. The Bundesbank hopes that the clearing bank in Frankfurt can begin working as early as late autumn.

Along with the currency clearing agreement, Deutsche Börse, the operator of the Frankfurt stock exchange, signed a separate agreement with the PBOC that will facilitate access to European capital markets and stock listings for Chinese issuers and investors.

The RMB Handbook

Risk books in July 2012 published ‘The RMB Handbook: Trading, Investing and Hedging’ by Hai Xin a freelance consultant working in Hong Kong. (Previously Xin was a managing director and head of Asia Pacific at Overlay Asset Management (OAM), and part of BNP Paribas group between 2005 and 2012.)

Risk description of the handbook goes as follows, “The RMB Handbook provides a comprehensive review of the attitudes to and development of RMB, most importantly offering practical advice to different categories of end-users regarding the various financial instruments linked to RMB, and demonstrating how practitioners can make use of these to achieve their objectives (while working within the parameters of new regulations).”

The RMB Handbook covers the background to the Chinese economy and the RMB, Onshore FX instruments and market, Offshor FX instruments and market, practical issues to RMB trading, hedging and investment, and has a look future developments. Although this Handbook is 18 months old, it gives important background on what is happening and might occur in the future.

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CTMfile take: The PBOC is carefully putting in place the infrastructure to ensure that the RMB will be one the world’s leading trading currencies. This raises the question for corporate treasurers, “When could the RMB become your reserve currency?”