News Column

ICBC eyes yuan clearing bank

July 19, 2014

By Pathom Sangwongwanich, Bangkok Post, Thailand

July 19--A yuan clearing house is expected to commence operation in Thailand within two years, enhancing opportunities for bilateral trade and production, says the Industrial and Commercial Bank of China (ICBC).

Even though the People's Bank of China has not yet appointed a yuan clearing bank in Thailand, the currency is still used in international trade between China and Thailand, said Li Yanni, head of cross-border yuan business management.

"ICBC has a clearing bank in Singapore, and the volumes of trade and production grew very rapidly after a yuan clearing system was established," she said without commenting on whether the ICBC would initiate this move.

"I think it is very valuable for Thailand to have its own yuan clearing bank."

Exclusive privileges for a yuan clearing bank would be the ability to tap into the Chinese domestic market, as these measures would provide more financial liquidity flowing into the local market from these clearing banks, Ms Li said.

She said the yuan had the potential to become a common trading currency once the Asean Economic Community took effect late next year, thanks to its close geographical location and increasing trade volume between China and Asean.

China and border countries in Asean have been using the yuan for trading since the 1990s, Ms Li said.

Regarding the recent creation of the US$100-billionBRICS Development Bank, the move is likely to enhance the yuan's internationalisation, she said. BRICS is a group of five emerging economies ? Brazil, Russia, India, China and South Africa. They agreed to create their own development bank this week, aimed at providing money for infrastructure and development projects in BRICS.

Li Zhigang, chief executive of ICBC (Thai), said the advantages of a yuan clearing bank in Thailand would be helping Chinese investors with cost-benefit investments and facilitating foreign exchange. Chinese investors are interested in Thailand, particularly in telecommunications, manufacturing and infrastructure.

It is also possible a yuan market and hedging system could be established in Thailand in a few years if a settlement bank is created, he said.

Thai investors could reap benefits from using the yuan for trade due to low volatility between it and the baht, said Chantavarn Sucharitakul, assistant Bank of Thailand governor overseeing the financial operations group.

However, there are obstacles to foreign exchange hedging for Thai traders, as the yuan is not widely used and access to the yuan market remains restricted, she said.

Ms Chantavarn said despite a 14% bilateral trade proportion, the yuan usage ratio for trade between China and Thailand was only 1%, but that could expand if Chinese authorities adopted more flexible currency management rules.

The central bank has no plans to increase its yuan reserves at this time, she added.


(c)2014 the Bangkok Post (Bangkok, Thailand)

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Source: Bangkok Post (Thailand)

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