Dubai to Become Second Middle East Clearing Hub for China's Yuan

The continued internationalization of China’s currency keeps gathering pace, as People's Bank of China plans to pick a Chinese bank to clear yuan transactions in the UAE, becoming the second country in the Middle East to do so as China's economic ties with the region strengthen.

In 2015, Qatar became the first country in the Middle East to host a yuan clearing and settlement facility, with Industrial and Commercial Bank of China (ICBC) becoming the clearing bank. Qatar has become ICBC's third-largest overseas clearing center globally behind Singapore and Luxembourg, handling 350 billion yuan ($52.6 billion) in transactions since it launched.

In December 2015, the UAE and China signed a memorandum of understanding to set up a clearing centre for the Chinese currency in the country.

The announcement by the UAE, the second largest Arab economy after Saudi Arabia, follows the IMF’s decision to admit the yuan into its SDR basket. Last year, the currency was used for 74 per cent of Payments Payments One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonl One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonl Read this Term by value from the UAE to China and Hong Kong.

Seeking to promote global use of the yuan, China has in the past two years appointed clearing banks for Taiwan, Singapore, London, Frankfurt, Paris, Luxembourg and Seoul among many others.

A clearing bank can handle all parts of a transaction from when a commitment is made until it is settled which reduces costs and time taken for trading, boosting activity in a financial centre.

Hub for the whole Middle East

In another sign of growing regional interest in the yuan, the Dubai Gold and Commodities Exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term (DGCX) launched its Chinese yuan futures contracts in December. The step aimed to further facilitate the derivatives exchange’s participation in the movement of the Chinese currency market and enable traders to track CNH price returns whilst being able to settle in USD.

A clearing bank in the UAE could have a big impact on trade and investment in the Gulf because Dubai acts as the region’s top business center, handling flows of money and goods to countries in the six-nation Gulf Cooperation Council and beyond.

Fang Min, senior executive officer of Agricultural Bank of China (ABC), said in an interview with Reuters that “everyone thinks of Dubai as the hub for the whole of the Middle East,” and it is the most appropriate place to set up an offshore renminbi market.

Fang added that one of the big four Chinese banks - ABC, ICBC, Bank of China and China Construction Bank - would become the UAE’s yuan clearing bank.