On 18 November 2014, the Chinese government announced that the
Bank of China would be the clearing bank for the Chinese currency,
Renminbi (RMB), in Sydney. Having an RMB clearing bank in Sydney
presents a tremendous opportunity for Australian businesses,
whether they are involved in financial services or not. We set out
what it means by answering a few simple questions.
Q: Was an RMB clearing bank required to make RMB payments in
A: No. Payments in RMB can already be made in
Australia, either though the RMB denominated accounts held with
banks, or through Australia's RMB settlement system (see
below). However, a local RMB clearing bank makes the use of RMB for
payments easier, particularly for larger amounts.
Q: So, what does the official RMB clearing bank add?
A: Lots. On a financial level, the RMB clearing bank
a more direct link to the liquidity in RMB which is able to be
provided by China's central bank, the People's Bank of
China (PBC). This should add further comfort that RMB will be
available when it is needed.
for payments being made through to China, it should provide
access to China's Real-time Gross Settlement System (CNAPS).
This should add further clarity as to when payments to China reach
potentially, if similar arrangements to those in Hong Kong are
to become available, access to fiduciary accounts structures
maintained by the BoC with the PBC on behalf of its clients. This
should help with the management of risk profiles for large amounts,
by moving between commercial bank and central bank money.
Further, on a global level, the presence of an RMB clearing bank
is international recognition of the importance of Sydney as an
Asian financial centre through an official link to the Chinese
currency, its financial system and the participants in its
Q: What does this mean for Australia's RMB settlement
A: It is very positive. Bank of China is the RMB
settlement bank in Australia's RMB Settlement Service, which
was established earlier this year using ASX's Austraclear
settlement infrastructure. This allows participants to make
payments to each other through RMB denominated cash records in
Austraclear, which are then reflected in the participant's
accounts with the Bank of China. The appointment of the Bank of
China as RMB clearing bank means that this service can make a
connection to China's CNAPS system (see above) so that clear
payments through to Chinese recipients should become possible.
Q: What about the swap agreement between the RBA and the
A: This is separate, but still important. The bilateral
local currency swap agreement between the RBA and the PBC has been
in place since 2012 and allows the RBA and the PBC to exchange
Australian dollars and RMB for agreed purposes. The intention of
this swap agreement is to provide confidence that RMB liquidity can
be made available to the Australian market through a
'backstop' channel in the event of a disruption in the RMB
market. However, it is not intended to be a source of funding at
times where the market is functioning normally nor does it relate
directly to the appointment of the RMB clearing bank.
Q: What does this mean for RMB internationalisation in
A: It is a significant milestone. It makes it easier
for Australians to use RMB for payments and gives them more comfort
when they do so. When taken together with Australia's RMB
settlement service, there is a complete method for the use of RMB
in Australia as a transaction and investment currency. Now, it is
up to the Australian marketplace to identify and seize the
opportunities to pay, receive, lend, borrow and invest in RMB in
Australia. Other marketplaces have done so, and more are sure to do
so in the future.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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