(Sept 17): China has expanded its onshore central clearing system to more foreign currencies, another step towards promoting direct trading with the yuan and reducing reliance on the dollar.
Shanghai Clearing House began central counterparty (CCP) services for spot trades of the Singapore dollar, New Zealand dollar and Thai baht on Sept 14, it said in a statement on Wednesday. Twelve banks participated in the first session, clearing 996 million yuan (RM600.8 million) of transactions.
The expansion may pave the way for more currencies to be cleared directly against the yuan as Beijing seeks to broaden its global use. It follows a push by Chinese banks this year to offer clients more direct yuan trading options as overseas trade and investment grows.
“This is a positive step for RMB internationalisation as CCP reduces counterparty risk and lowers the capital and credit line costs of trading, which should encourage banks to quote more actively and deepen liquidity in RMB/SGD, RMB/THB and RMB/NZD,” said Bosco Wu, a strategist at the Bank of East Asia. “If banks pass those savings on through tighter pricing, RMB settlement becomes marginally more attractive for counterparties.”
The settlement provider said the new pairs will support foreign-exchange services linked to the Belt and Road Initiative, with plans to broaden the network further and promote the internationalisation of the yuan. The clearing house, authorised by the People’s Bank of China, already offers central clearing for the yuan against currencies including the dollar, euro, pound, Australian dollar and yen.
Central clearing may reduce counterparty credit risk and improve balance-sheet efficiency by netting transactions that would otherwise be settled bilaterally. Shanghai Clearing House will waive clearing fees for the three new currency pairs through the end of 2028 to help lower trading costs, it said in another statement last week.
