Internationalising

First RMB-Denominated ETF Lists in Paris Alongside MoU

Relations between China and Europe have just gotten closer in the realm of finance.

The last two days have seen the signing of two Memoranda of Understandings (MoEs) between participants from the two regions, as well as the first listing of an Renminbi (RMB) denominated exchange-traded fund (ETF) in Continental Europe.

Firstly, on Monday (June 29), China Construction Bank (CCB), a leading commercial bank in China, and the Brussels-based Euroclear, an international central securities depository, signed an MoU expressing their mutual intentions to further develop the offshore RMB capital market. The two parties vowed to work together to support the development and provision of offshore RMB financial products and services, including  an RMB-denominated ETF.

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CCB and Euroclear have vowed to work together to support the development and provision of offshore RMB financial products and services.

Subsequently on Tuesday, the two parties were again in the limelight, as the ETF in question became a reality. Indeed, Euronext, the Eurozone’s primary exchange, listed its first money market ETF denominated in RMB on its Paris market – the Commerzbank CCBI RQFII Money Market UCITS ETF.  The CCB-owned CCB International Asset Management Limited will serve as the Investment Manager, while the ETF will be settled exclusively with Euroclear.

The ETF allows investors exposure to the interbank bond market in Mainland China and will be available for trading in both RMB and euros.

The listing was accompanied by another MoE, this time between the European exchange and the Chinese behemoth, CCB. The two parties have agreed to develop a strategy to enhance the bank’s access to European capital markets.

According to a statement from Euronext, the agreement encompasses: “The possibility of [an arm of CCB] becoming a trading member of Euronext markets; easing access to Euronext products within CCB; and RMB payment and settlement structures.

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It is expected that the cooperation between the two companies will further push forward RMB internationalization, and will enable Euronext markets to become offshore RMB business centres. The MOU will also pave the way for Chinese enterprises to come to Europe for finance, investment and commodities trading.”

Jos Dijsselhof, Interim Chief Executive of Euronext, said, “We are delighted to welcome CCB … as investment manager on ETFs now listed on our Euronext markets. The RMB is increasingly used in cross border transactions so this is an exciting step for Euronext as we continue to develop our offer in RMB- denominated products and welcome Chinese investors to our market.”

The RMB is increasingly used in cross border transactions so this is an exciting step for Euronext as we continue to develop our offer in RMB-denominated products.

Chairman of the Board of Directors of CCB, Wang Hongzhang, said, “Developing offshore RMB business in Europe is one of the key elements in CCB’s internationalization strategy; the cooperation with Euronext marks another important historical milestone. We believe, not only does this allow us to gain further access to the European capital markets, internationalize our operations, and provide our clients with additional channels to invest in Euronext Paris, it will also encourage an extensive use of RMB products by French enterprises, financial institutions and investors, and ultimately drive the internationalization of the RMB.”

Indeed, the events follow a broader narrative; namely, the internationalisation of the Chinese currency. Alongside the economic rise of China, the internationalisation of the RMB has been a part of a wider reform process.

Opening up the currency to international market forces is seen as an essential ingredient in the progressive development and liberalisation of domestic financial markets.The continued  international usage of offshore RMB further contributes to the currency’s “store of value”, taking it one step closer to becoming a truly global reserve currency.

 

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