China is accelerating its penetration into the Middle East with a new clearing agreement for the yuan in the troubled region. Xinhua, China’s official news agency, reported yesterday that the United Arab Emirates (UAE) has signed an agreement with China to set up a clearing hub for the Chinese currency, also called the renminbi (“people’s currency”).
A local UAE media report quoting UAE’s central bank stated that the two countries signed the deal during Abu Dhabi Crown Prince Sheikh Mohamed bin Zayed Al-Nahyan’s official visit to China earlier this month.
No specific date was revealed regarding when the hub will be opened for trading, but the UAE and China also renewed a 35 billion yuan (5.42 billion USD) currency swap during the Crown Prince’s visit.
The clearing hub will be the second in the Middle East after the Gulf state Qatar set up the region’s first yuan clearing hub this April. The new clearing hub is expected to satisfy the growing needs of UAE-based firms and banks in their dealings with the Chinese currency.
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UAE’s Biggest Bilateral Partner
The RMB Qualified Foreign Institutional Investor program included the UAE, one of the world’s major oil suppliers. As part of this arrangement, the Gulf state was given a quota of 55 billion RMB (8.53 billion USD or 31.3 billion UAE dirham).
This latest pact between the countries follows China surpassing India as the biggest trade partner of the UAE, with bilateral trade reaching nearly $50 million in 2014. This year, government officials estimated that bilateral trade has surpassed $60 million.
Xinhua added that a staggering number of Chinese companies run branches in the UAE- more than 4,000. Among them are the four biggest Chinese lenders ICBC, China Construction Bank, Agricultural Bank of China and Bank of China. In addition, over 300,000 Chinese citizens reside in the UAE.
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