China Central Bank gives $8 bln in pilot scheme for Swiss investors
January 22, 2015, 5:50 am

Chinese Premier Li Keqiang (L) and President Simonetta Sommaruga of the Swiss Confederation attend a signing ceremony after their talks in Davos, Switzerland, on Jan. 21, 2015 [Xinhua]

The agreement is part of a memorandum of understanding signed by the central banks of the two countries in Davos and aids China’s attempts to diminish the dollar’s dominance in global trade and finance.

Switzerland’s central bank also said it had agreed with the People’s Bank of China (PBOC) to establish clearing arrangements in Switzerland for renminbi (yuan) trading.

“We are willing to make Switzerland one of the centres of offshore RMB business,” said Li.

Pending regulators’ approval, the deal will see the set up of the first branch of a Chinese bank in the Swiss financial hub of Zurich for future yuan clearance.

The deal is set to materialize Beijing and Bern’s pledge for closer financial ties and accelerate the establishment of a Zurich offshore yuan market.

Zurich joins a growing list of international hotspots like Sydney, Seoul, Paris, Luxembourg, London, Frankfurt, Singapore and Hong Kong which are already global centres for trading the yuan.

China and Switzerland also inked cooperation pacts in the areas of food, medicine and scientific research.

In July last year, Chinese and Swiss central banks signed a bilateral currency swap agreement worth 150 billion yuan ($24 billion) in a bid to provide liquidity support for bilateral trade.

China’s currency will probably be more widely used than the yen and the pound in financial markets and trade in a few years, and the government should lobby other countries to have it included in the SDR (Special Drawing Rights) basket, the Shanghai Development Research Foundation said in a report in 2014.

An upcoming review of the basket of currencie members can count toward their official reserves could see official IMF endorsement for the yuan as a global reserve currency alongside the dollar and euro in 2015

Li is attending the WEF meeting in Davos and paying a working visit to Switzerland, his second trip to the Alpine country since he took office in 2013.

TBP and Agencies