China will establish an official currency clearing house in Australia.
The hub to be set up in Sydney will facilitate trade in the Chinese yuan, officially called renminbi (RMB) – a move it is hoped will further open up the powerhouse Asian economy to Australian businesses.
“The establishment of an RMB clearing bank here in Australia is very, very good news indeed,” said Prime Minister Tony Abbott alongside China’s President Xi Jinping in Canberra.
Australia’s central Reserve Bank of Australia said it had signed a memorandum of understanding with the People’s Bank of China to establish the hub, which is hoped will help build bilateral trade between the major trading partners.
“The clearing arrangements will provide a more direct means of facilitating cross-border RMB transactions between Australian and Chinese entities than was previously available,” the bank said.
Australian banks welcomed the move which they said would make it faster and easier for customers to trade and transact in the Chinese currency.
“The renminbi is expected to dominate Asian trade and could become a genuine rival to the US dollar as a global reserve currency,” ANZ chief Mike Smith said.
China is also allowing Australian-based financial institutions greater direct investment access to China’s domestic bond and equity markets via its RMB Qualified Foreign Institutional Investor programme, the RBA said.
“Today’s announcements will help ensure Australia is prepared to benefit from RMB-related trade and investment opportunities that emerge as China continues to deepen its integration into the global economy,” Treasurer Joe Hockey said.
In pitching Sydney as the venue for the hub in September, New South Wales Premier Mike Baird said only one percent of Australian trade with China was currently settled in RMB.
The RMB is among the top 10 most traded currencies in the world, and there are estimates it will be used to settle 30% of China’s total trade by the end of 2015.