Bloomberg News

Swiss Banks Push for Zurich to Become Yuan Offshore Trading Hub

July 05, 2013

Swiss banks are pushing for Zurich to become a center for yuan trading in Europe as China seeks to take its currency global.

“Switzerland is already a hub for the renminbi, but we need to add to the infrastructure to strengthen that notion even more,” Heinrich Siegmann of the Swiss Bankers Association said at a briefing in Zurich, referring to another term for the yuan. “We have government support to becoming a hub, we have investments in renminbi bonds, and we have trading of these bonds.”

Switzerland is basing its push for the offshore yuan business on the country’s close ties with China, one of the nation’s biggest trading partner. About 4 percent of Swiss exports went to China in 2012, making the country the sixth most important destination for foreign trade behind countries including Germany, the U.S., and Italy, according to the Swiss customs office. About 6 percent of Swiss imports came from China in 2012.

China’s new Prime Minister Li Keqiang made the Alpine country his initial stop on his first trip to Europe as premier in May. Swiss Economy Minister Johann Schneider-Ammann is flying to Beijing today to sign an FTA tomorrow. The two countries have also entered into a memorandum of understanding on financial market dialog.

“Many banks are so-called qualified domestic institutional investors in China, which allow for some privileged access to the Chinese market,” Siegmann said in Zurich today. “We still have a bit of work to do, in terms of clearing and swap lines, clearly that would be an element that would be nice to add to Switzerland as a hub.”

Outside Mainland

The world’s second-largest economy started pushing for the great use of the yuan outside the mainland in 2010 and last month signed a three-year swap agreement for 200 billion yuan ($32.6 billion) with the Bank of England to foster trading in London. The European Central Bank, based in Frankfurt, may obtain a deal valued at four times that amount, according to lobby group Frankfurt Main Finance. Almost 80 percent of offshore yuan trading is currently settled in Hong Kong.

By 2015, a third of China’s cross-border trade will be settled in yuan, making the currency one of the three most used in global trading along with the dollar and euro, according to a HSBC Holdings Plc.

Yuan-denominated notes, known as dim sum bonds, sold by companies, including McDonald’s Corp. and Caterpillar Inc., rose to 174 billion yuan last year from 16 billion yuan in 2009, Bloomberg data show. The accords provide companies with a safety net that aims to give them more confidence in doing business with their Chinese partners.

To contact the reporters on this story: Corinne Gretler in Zurich at cgretler1@bloomberg.net; Catherine Bosley in Zurich at cbosley1@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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