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(Bloomberg) -- The Swiss National Bank and the People’s Bank of China intend to establish yuan clearing in Switzerland, a step designed to help increase cross-border transactions in the Chinese currency.
The PBOC would also extend the pilot project known as Renminbi Qualified Foreign Institutional Investor to Switzerland with a quota of 50 billion yuan ($8 billion), the SNB said in a statement Wednesday announcing the signing of a memorandum of understanding between the two central banks.
The deal “will promote the use of the renminbi by enterprises and financial institutions in cross-border transactions, and promote facilitation of bilateral trade and investment,” said the SNB, based in Bern and Zurich.
China is loosening exchange-rate controls in an overhaul of its economy. At the same time, Swiss banks are pushing for the country to become a center for yuan trading in Europe, as they face the prospect of losing banking secrecy for offshore clients.
The Swiss Bankers Association said it “welcomes” the announcement, as it has been trying for more than two years to make Switzerland a hub for Chinese business to benefit from its strong growth. “Today’s announcement marks a further step in this direction,” the association said in a statement Wednesday.
In June of last year, the Swiss and Chinese central banks signed an agreement permitting the purchase and repurchase of as much as 150 billion yuan.
Geneva is a major trade-financing hub, and Switzerland’s free-trade agreement with China came into effect last year. Because of the FTA, China agreed to cut tariffs on Swiss watches, machinery and chemical imports from companies including Swatch Group AG and robot-maker ABB Ltd.’s Swiss unit.
--With assistance from Alessandro Speciale in Frankfurt.
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