China, Australia finalize FTA, launch yuan clearing in Sydney
November 17, 2014, 12:21 pm

Chinese President Xi Jinping (L) and Australian Prime Minister Tony Abbott meet the press in Canberra, capital of Australia, Nov. 17, 2014 [Xinhua]

According to the memorandum of understanding inked by the two countries’ central banks, the People’s Bank of China and the Reserve Bank of Australia, China will set up a clearing bank in Sydney to handle transactions denominated in RMB, or the Chinese yuan.

The People’s Bank of China made the announcement in a statement posted on its website, www.pbc.gov.cn

Under the agreement, China will grant Australian banking institutions a 50-billion-yuan ($8.2 billion) quota under the RMB Qualified Foreign Institutional Investors (RQFII) program.

Also, China has agreed to increase to 10 billion yuan (1.6 billion dollars) the maximal amount the Reserve Bank of Australia is allowed to invest in China’s interbank bond market.

Launched in 2011, the RQFII program allows foreign investors to invest in Chinese onshore stock and bond markets with offshore RMB.

So far this year, the world’s second largest economy has reached agreements with Germany, Britain, France, Luxembourg and South Korea to open local RMB trading hubs, as the Chinese currency has gained increasing popularity in global trade and investment.

Chinese and Australian Ministers on signed a Declaration of Intent for a multi-billion dollar FTA on Monday.

Visiting Chinese President Xi Jinping and Australian Prime Minister Tony Abbott witnessed the signing of the declaration of intent by Chinese Commerce Minister Gao Hucheng and Australian Minister for Trade and Investment Andrew Robb.

The agreement will be signed in 2015 after the draft is translated and legally reviewed.

The conclusion of bilateral FTA talks “is a big event worth celebrating in our economic and trade relations,” Xi told Abbott

According to the results of the nine-year-long talks, Australia will eventually remove tariffs on all goods imported from China, and a vast majority of Australian products will enter China tariff-free.

China and Australia also agreed to grant each other the most favored nation status once the FTA takes effect.

“The China-Australia FTA will add billions of dollars to our economy, create jobs & drive higher living standards,” said Australian Prime Minister Tony Abbott in Canberra on Monday.

Earlier during the day, Chinese President Xi Jinping addressed a joint sitting of the Australian Federal Parliament.

China is now Australia’s largest trading partner, export market and source of imports. Two-way trade reached $136.4 billion in 2013, a year-on-year rise of 11.5 per cent.

TBP and Agencies