Trade and business ties to strengthen further after the implementation by mid-2014
Major Australian stock exchange ASX has issued a press release outlining an agreement between the Bank of China and ASX to provide Chinese Yuan settlement services to the Australian and Chinese financial markets by the middle of this year. The agreement was signed today in Sydney and provides us with yet another signal that the internationalization of the Renminbi is way on its way.
The trade relationship between Australia and China amounted to about $120 billion in 2013 and according to the Bank of China’s Country Head and General Manager of the Sydney branch Shanjun Hu and ASX’s Managing Director and CEO Elmer Funke the service will permit Australian companies to exchange payments with their Chinese counterparts more efficient and convenient with the use of the prime infrastructure that the ASX provides.
The launch will reduce costs for cross-border transactions and permit Aussie companies to use the Renminbi as a settlement currency. Exchange rate risks will be mitigated while providing better global connectivity of Australian financial markets to the rest of the world.
Executive Vice President of the Bank of China has stated that the initiative is a result from increased market demand and is only the beginning of a strategic cooperation between the Bank of China and ASX. Chinese companies are interested to enter Australian markets to obtain financing through bond sales and share offerings.
Without doubt this announcement will further strengthen Sino-Australian trade and business relationships and also put more emphasis on the Australian dollar’s dependence on the Chinese economy. It is widely known that the Aussie is considered as a proxy trade to the Chinese economy and many traders who don’t have access to the offshore CNH market are betting on economic developments in the world’s second biggest economy through the Australian currency.
Forex Industry Report