For the first time, China has granted a European financial entity, Deutsche Bank, the authority to directly clear Chinese yuan settlements, in its latest de-dollarization push. This allows firms that pay in the Chinese yuan to settle payments in the same currency. Companies will have no requirements to convert currencies to the US dollar. Businesses can save millions in foreign exchange, and also help in strengthening the Chinese yuan. This gives the local currency a boost in the arm and an opportunity to perform well in the forex markets.
The People’s Bank of China (PBOC) designated Germany’s Deutsche Bank as the Chinese yuan clearing entity in Frankfurt. For the uninitiated, a clearing bank moderates the amount that banks swap during cross-border transactions and connects them when the actual fund settlement takes place. This is the first time that a European bank has agreed to clear Chinese yuan payments directly. China has stepped up de-dollarization and is aggressively pushing the agenda in every direction.
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Deutsche Bank To Settle Payments Directly in the Chinese Yuan: De-Dollarization
China has been eyeing de-dollarization by pushing the Chinese yuan into the European financial markets. Deutsche Bank has had a long-standing positive relationship with China’s financial market before the PBOC granted them the authority to directly settle Chinese yuan payments. This allows them to clear payments for European organizations and financial institutions. Moreover, the development comes as the Xi Jinping administration is intending to internationalize the Chinese yuan.
“A direct bridge to China’s financial system has been established. Our ability to support clients participating in trade and investment between Europe and China will be strengthened,” said Leo Yin, Head of Deutsche Bank China. The bank said that European clients can save on forex exchange and reduce all the inconvenience of currency conversion. While de-dollarization was growing in Asia and Africa, it is now penetrating Europe.