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The PBOC made the decision in accordance with an MOU signed with the French central bank La Banque de France to help turn the city into an offshore RMB center.
Competition is fierce among Europe’s major financial centres, Frankfurt, London and Luxembourg to trade in China’s currency.
Beijing is keen on substituting the US dollar with the yuan in all of China’s trade with other countries. The Chinese currency now trades directly with the Japanese yen, the Australian dollar, the Brazilian real, the EU’s euro, the New Zealand dollar and many other currencies.
BOC became the RMB clearing bank in Frankfurt in June while China Construction Bank was authorized to be the RMB clearing bank in London.
China stepped up plans to increase the international use of its currency last October with an agreement between the European Central Bank and the PBOC to swap euros and yuan.
The PBOC is yet to announce the RMB clearing bank in Luxembourg.
A BOC spokesman said the “mechanism of RMB clearing business in Paris will help Chinese and French companies and financial institutions to use the yuan for cross-border transactions and facilitate the free trade and investment between the two countries”.
BOC has so far opened more than 1,200 inter-bank RMB clearing accounts and 1.7 million RMB accounts for corporate and individual clients overseas.
The bank almost doubled its RMB payment and clearing business from a year ago to 112 trillion yuan ($18.23 trillion) in the first half of this year, BOC data showed. Its Paris branch handled more than 1.3 trillion yuan of RMB clearing business last year.
In a major highlight of an investment meet earlier this month, Moscow and Beijing have entered into a pact to boost use of the rouble and yuan for trade transactions.
“We’re going to encourage companies from the two countries to settle more in local currencies, to avoid using a currency from a third country,” Russia’s Deputy Prime Minister Igor Shuvalov said referring to the US dollar.
Meanwhile, the UK will become the first Western country to issue an offshore bond in the Chinese renminbi. This was announced after discussions between Chinese Vice Premier Ma Kai and UK Chancellor of the Exchequer George Osborne earlier last week.
Osborne says the issue will be similar in size to a 2 billion RMB bond issued in London by the China Development Bank.
It is expected that the issue will come before the end of the year and that the proceeds will be used to finance Britain’s foreign currency reserves.
TBP and Agencies