ICBC to Build Offshore Yuan Center in Los Angeles
By Conviron Altatis On November 24, 2014
ICBC announced having signed a yuan trading agreement with the Los Angeles City government.
Industrial and Commercial Bank of China (ICBC) announced on Nov. 22 that it had signed an agreement with the city government of Los Angeles to create an offshore yuan center in California and promote cross-border yuan trade, the Global Times reported.
In a statement, ICBC said that the creation of an offshore yuan center in the largest state in the United States would establish greater yuan trade with China. Before the U.S., several other countries have already established cross-border trade in yuan.
According to a Chinese bank executive, the U.S. dollar is still the dominant currency in the world, and American firms are not willing to accept the yuan so the U.S. has fallen behind other markets in setting up offshore yuan trading hubs.
While expanding its already substantial economic and political influence, China aims to promote yuan to more international investors and turn the currency into a global reserve currency in the long run.
In the first nine months of 2014, cross-border payments between China and the U.S. reached over 160 billion yuan ($26.13 billion) and approximately 15 percent of China’s trade was settled in yuan.
In this period, the cross-border business of ICBC was worth approximately 28 trillion yuan, which is over 80 percent from the same period in 2013.
ICBC is not only the biggest lender of China and country’s Big Four along with China Construction Bank, Bank of China and Agricultural Bank of China; it is also the world’s largest bank in terms of market capitalization and total assets.
On Nov. 18, Bank of China also collaborated with the Australian Stock Exchange to enhance yuan trading in Australia.
Meanwhile, ICBC chairman Jiang Jianqing said at a forum in Beijing that People’s Bank of China’s 0.4-percentage point decrease in the lending rate and a 0.25-percentage point cut in the deposit rate both in one-year period will “inevitably squeeze the profit margins of banks.”
With this move by the PBOC, the returns of depositors will be unaffected if lenders increase rates to the new ceiling, Bloomberg reported.