News Column

China,Switzerland : SWITZERLAND one step closer to becoming a yuan hub

July 24, 2014

Switzerland is one step closer to becoming an offshore yuan hub after it signed a bilateral currency swap agreement with the People's Bank of China and obtained a quota to invest in China's interbank bond market.

The agreement enables yuan and Swiss francs to be purchased and repurchased between the Swiss National Bank and the PBOC, to a limit of 150 billion yuan (HK$187.2 billion).

The SNB obtained a yuan investment quota, which it could invest a part of its foreign exchange reserves in the Chinese bond market.

The SNB flagged its ambition to build an offshore yuan hub saying that the swap agreement is a key prerequisite for the development of the yuan market in Switzerland.

The swap is a tool to provide liquidity support for bilateral economic and trade exchanges and help maintain financial stability.

Switzerland's potential as a hub has 3 major aspects. It is a very strong asset management hub, with 5 trillion Swiss francs in assets under management. It is one of the world's biggest commodity trading centres. The SMEs of Switzerland are competitive exporters and there is room for growth if they embrace the yuan.

Unlike Germany and France, which have sizeable trade with China, Switzerland's is relatively smaller.

Its position as the world's biggest trading hub for bankers, gives it a strong edge in its competition with London, Frankfurt, Luxembourg and Paris for the yuan-related business.

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Source: TendersInfo (India)

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