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New York, New York: BOC picked as US RMB clearing bank

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The US is one step closer to becoming a renminbi hub with Bank of China New York officially appointed as the country’s first RMB clearing bank, a major development towards the internationalisation of the currency.

Both the People’s Bank of China (PBoC) and BOC went public with the appointment this morning with the latter officially picked as a US RMB clearing bank on Tuesday.

This move has been some time coming with the US becoming more active in embracing the Chinese currency since last year.

Former New York mayor Michael Bloomberg is leading a working group on US RMB trading and clearing, which has collected endorsements from high-ranking officials, including Mary Schapiro, former chairman of the US Securities and Exchange Commission, and Timothy Geithner, secretary of the treasury for the first term of Barack Obama’s administration.

The working group was founded in 2015 and its members  include several of the largest US and Chinese banks in which BOC is one.

Stateside efforts to promote the RMB has so far been met with a positive response from China.

Those efforts started bearing fruit in June. As part of US-China strategic and economic dialogue, Yi Gang, vice governor of People’s Bank of China, announced the US would receive an Rmb250bn ($38bn) RMB qualified foreign institutional investor (RQFII) quota – the second largest globally behind only Hong Kong.

Another major aspect of the dialogue was that two RMB clearing banks would be appointed in the US, although so far only BOC has been named.

The announcement came during Chinese premier Li Keqiang’s visit to the US for the general assembly of the United Nations.

As part of the trip, Li also met with the working group’s chairman Bloomberg and co-chairman Henry Paulson.

"[This] is a welcome and important step forward," Paulson said in a written statement. "Both China and the US need to take further steps that permit international investors greater access to their financial markets."

"There's still more to do, in particular for China to continue to make progress in essential financial reforms and for the US to expand multi-currency account capabilities."

Now that a RMB clearing bank has been appointed and a RQFII quota readied, the remaining piece of the puzzle before the US becomes a RMB hub is for a swap line to be signed between the People’s Bank of China and the Federal Reserve. 

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