Australia and China have agreed to establish official renminbi (RMB) clearing arrangements in Australia. Central bank governors from both countries have signed a Memorandum of Understanding to formalise the agreement. The Chinese authorities will shortly announce the designated clearing bank.
Establishing an official clearing bank will support Australian importers and exporters by providing a more direct means of facilitating cross border RMB transactions between Australian and Chinese entities than was previously available. This is an important step towards the greater use of RMB in settling trade transactions between the two countries. This has the potential to reduce the costs of those transactions by between two per cent and three per cent, by reducing the need to hedge against forex risk.
The clearing bank announcement is part of a package of financial cooperation measures supporting greater financial ties between our two countries. Also announced today is a RMB Qualified Foreign Institutional Investor (RQFII) allocation of RMB50 billion (AUD $9.3 billion) for Australia.
The RQFII allocation will provide Australian-based financial institutions with unprecedented access to Chinese financial markets by allowing approved Australian institutional investors to invest directly in China's equity and bond markets.
Today's announcements will help ensure Australia is prepared to benefit from RMB related trade and investment opportunities that emerge as China continues to deepen its integration into the global economy.
In 2013 two-way trade was more than AUD $150 billion and is expected to continue to grow as our economic relationship with China continues to expand. As China continues to grow and reform its economy it is expected that the RMB will become increasingly important as an international trade and investment currency.
The clearing bank and the RQFII allocation will support the development of Australia's offshore RMB market allowing Australian-based financial institutions to create new products and investment strategies for their Australian clients.
The Treasurer and Minister for Trade and Investment today also signed for Australia an agreement to establish a framework for cooperation on investment. These agreements join others signed during President Xi Jinping's official visit to Canberra, including on completing negotiations on the FTA. Collectively, and along with several major commercial agreements also signed during President Xi's official visit to Canberra, these agreements will provide long lasting benefits to both economies and diversify the commercial relationship between Australia and China.