Renminbi clearing in Frankfurt
The RMB initiative
The use of the renminbi (RMB) as a trading currency and in international payments has grown steadily in recent years. In terms of transaction value, the RMB is now one of the six most-used currencies in the world. After France and the Netherlands, China is Germany's third most important trading partner and its leading trading partner outside the EU. Efficient clearing supports economic relations between China and Germany and the further opening-up of the Chinese economy – a core issue for the Chinese government.
Against this backdrop, the RMB Initiative Group convened for the first time in October 2013. One of the group’s key objectives is to establish Frankfurt as an RMB offshore trading centre. The RMB Initiative Group comprises Chinese banks based in Frankfurt, German financial service providers and the Deutsche Bundesbank. Leading German enterprises and trade associations support this initiative.
Renminbi clearing in Frankfurt and additional developments relating to offshore clearing
Since November 2014, it has been possible to clear RMB payments directly with China via the RMB clearing bank (the Bank of China’s Frankfurt branch) appointed by the Chinese central bank. The clearing bank maintains RMB-denominated accounts for German and European banks and enterprises. These accounts are used to settle RMB payments between the clearing bank's RMB account holders, as well as cross-border RMB payments with the People's Republic of China, Hong Kong or other offshore centres.
.The Frankfurt-based RMB clearing bank came into being after the Deutsche Bundesbank and the Chinese central bank, the People's Bank of China (PBoC), signed a memorandum of understanding in March 2014 to support and promote RMB clearing and settlement in Frankfurt.
In mid-June 2014, the PBoC selected the Frankfurt branch of the Bank of China as the RMB clearing bank. The PBoC provides the clearing bank with the necessary onshore access to RMB liquidity and enables it to participate in its payment system.
Establishing offshore RMB clearing banks forms part of the long-term strategy to open up the markets, allowing greater convertibility of the RMB while retaining options for exercising control. The PBoC has designated five offshore RMB clearing banks across Europe (in Frankfurt, London, Paris, Luxembourg and Zurich) and 20 clearing banks around the world.
The Sino-German Center of Finance and Economics (SGC) was founded in September 2015. Both the Deutsche Bundesbank and the PBoC are represented on its Board of Trustees. The SGC is part of the Goethe University in Frankfurt; its work centres on independent research, as well as education and training aimed at fostering greater mutual understanding.
Mid-November 2015 saw the launch of the first official trading venue for Chinese investment products traded in RMB outside the People's Republic of China. In May of that year, the Deutsche Börse Group, the Shanghai Stock Exchange and the China Financial Futures Exchange had entered into a joint venture to establish this venue, known as the China Europe International Exchange, or CEINEX. CEINEX, which is headquartered in Frankfurt, provides investors with access to the Chinese capital market during European and US trading times. The German-Chinese exchange operates using the well-established and globally available infrastructure provided by the Deutsche Börse Group. The three partners in the joint venture deliberately selected Frankfurt as the trading venue so that they can offer their services in the European regulatory environment and within the European and American time zones. The money flows resulting from securities settlement are channelled via the RMB clearing bank in Frankfurt.