Germany Vows to Uphold its Status as the Preferred Destination for Offshore Chinese Trading

A new partnership between Chinese banking giant, China Construction Bank, and German trading venue, Deutsche Borse, strengthens ties between the

Deutsche BörseInterest in the world’s second largest economy continues as London and Frankfurt keep their battle of the trading hubs, abreast. China’s leading banking institute, China Construction Bank (CCB), has signed a MOU with Germany’s largest trading venue, Deutsche Borse as it spearheads the process of internationalisation of the Chinese currency.

The two firms are expected to cooperate on various levels per details issued in the official press release outlined a number of pivotal projects that are expected to strengthen Germany’s role as a financial services provider, ahead of rival, London.

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The alliance has been classified as a ‘preferred partnership’ agreement – the notification states, “potential formats include expansion of CCB business activities in the European Union, for example through trading and clearing membership in Xetra, Eurex and Eurex Clearing. Deutsche Börse and CCB are also looking to collaborate in the post-trade and custody areas. Another focus will be joint development of the offshore renminbi market in Germany as well as in Europe as a whole. Both parties also plan intensive collaboration in training and professional development in support of the project.”

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The latest moves adds to Frankfurt’s desire of maintaining its position as Europe’s premier hub for accessing Asian financial and capital markets. Reto Francioni, CEO of Deutsche Börse, commented about the news in a statement, “we regard this new strategic partnership agreed today with China Construction Bank as an important extension of our Asian strategy. We are delighted to bring in our Group-wide expertise and capacity to offer top-quality China-related products and services in increasingly globalised markets.”

In particular, trading volumes have increased sporadically between Germany and China, with payments transacted in the Chinese Yuan increasing 116% YoY, according to data compiled by Swift in 2014.

The latest news comes one year after Germany officially became Europe’s first financial centre for clearing and settlement of trades in Chinese currency. Central bank’s from both countries signed agreements to mark the milestone which supports the increasing trade between the two nations.

The Chinese Yuan is one of the fastest growing emerging market currencies in terms of trading volumes, increasing activity between China and its international trading partners. This has bolstered the currency as it enhances its role as a diversified instrument – the Yuan is transferring from being limited to a trade currency and is gaining traction as a global reserve currency. The Yuan joined the top-ten traded currencies according to the last BIS Triennial 2013 FX Survey.

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