Swiss turn ea­gerly to ren­minbi

Chi­nese bank awaits ap­proval to es­tab­lish op­er­a­tions in Zurich, a world fi­nance cen­ter

China Daily (Canada) - - FRONT PAGE - By ZHAO YI NAN in Davos and ZHAO SHENGNAN in Beijing Con­tact the writer at zhaoy­i­nan@ chi­

After ditch­ing its euro cap, Switzer­land courted the yuan with re­newed vigor as it signed key fi­nan­cial deals with China on Wed­nes­day.

Zurich re­ceived 50 bil­lion yuan ($8 bil­lion) as its Ren­minbi Qual­i­fied For­eign In­sti­tu­tional In­vestors quota, which will al­low in­vestors in Switzer­land’s fi­nan­cial cap­i­tal to invest ren­minbi di­rectly into Chi­nese fi­nan­cial mar­kets.

The coun­tries also signed a doc­u­ment that will see the first branch of­fice of a Chi­nese bank in a coun­try known for its bank­ing prow­ess.

The es­tab­lish­ment of a Chi­nese bank, still wait­ing for ap­proval from the Swiss au­thor­i­ties, is a pre­req­ui­site for a bi­lat­eral cur­rency swap deal and a ma­jor step in build­ing Zurich into an im­por­tant off­shore cen­ter for the ren­minbi.

Premier Li Ke­qiang and the pres­i­dent of the Swiss Con­fed­er­a­tion, Si­mon­etta Som­maruga, wit­nessed the sign­ing of the deals on Wed­nes­day after the two met in Davos, where the an­nual meet­ing of the World Eco­nomic Fo­rum is un­der­way.

Ex­perts said Switzer­land’s decision to scrap the Swiss franc-euro cap in­di­cates that the coun­try is seek­ing al­ter­na­tive part­ners as the out­look for the euro re­mains bear­ish in light of loom­ing quan­ti­ta­tive eas­ing and an ex­pected drop in value.

Zurich’s sta­tus as an in­ter­na­tional fi­nan­cial cen­ter will also help to speed up the in­ter­na­tion­al­iza­tion of the ren­minbi, the ex­perts said.

Zurich is the lat­est city in Europe to com­pete for the RQFII pro­gram — launched by the Chi­nese gov­ern­ment in 2011 — fol­low­ing Lux­em­bourg, London, Frankfurt and Paris.

Last year, China’s for­eign cur­rency watch­dog said at least 71 in­ter­na­tional fi­nan­cial in­sti­tu­tions have taken part in the pro­gram, with a to­tal al­lowance of 250.3 bil­lion yuan.

Ding Yi­fan, a re­searcher at the State Coun­cil’s De­vel­op­ment Re­search Cen­ter, said Euro­pean ci­ties are ea­ger to be­come more en­gaged in the ren­minbi business be­cause of it’s huge po­ten­tial ben­e­fits.

In ad­di­tion to speed­ing up the in­ter­na­tion­al­iza­tion of the ren­minbi, the pro­gram will help re­duce risk for Chi­nese busi­ness­men if they can set­tle ex­ports and im­ports in ren­minbi, in­stead of dol­lars or euros, Ding said.

The yuan ap­pears headed for the ma­jor leagues of cur­rency after a surge in in­ter­est. Off­shore trad­ing in yuan soared some 350 per­cent on Thom­son Reuters trad­ing plat­forms in 2014.

Dong Jinyi, for­mer Chi­nese am­bas­sador to Switzer­land, said closer fi­nan­cial co­op­er­a­tion with China shows that Switzer­land is op­ti­mistic about the ren­minbi be­cause it is backed by the Chi­nese econ­omy’s size and growth rate.

Data re­leased on Tues­day by the gov­ern­ment showed that China’s econ­omy grew by 7.4 per­cent in 2014, its slow­est pace in 24 years. But GDP ex­ceeded $10 tril­lion for the first time last year and the growth rate is in line with mar­ket ex­pec­ta­tions.

Co­op­er­a­tion will also boost trade and in­vest­ment be­tween China and Europe, Dong said.

Switzer­land is China’s fifth-largest trad­ing part­ner in Europe. Both coun­tries’ trade vol­ume reached $59.5 bil­lion in 2013, up by 126 per­cent, ac­cord­ing to Chi­nese cus­toms re­ports.


Premier Li Ke­qiang

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