Bank of China Enters First Renminbi and Forex Derivatives Agreements with Offshore Institutions

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Two of Bank of China’s (BOC) branches in Beijing have just undertaken the city’s first renminbi and foreign exchange derivatives operations for offshore institutional clients.

On 17 May BOC’s China World Trade Centre Branch entered a forward settlement deal with Qianpu (Hong Kong) Co., Ltd. (前普(香港)有限公司), while BOC’s Beijing Shunyi branch entered a forward settlement deal with Hongyuan Logistics Co., Ltd. (空港宏远物流有限公司), allowing both clients to lock in foreign exchange rates at dates in the futures.

The move follows the release of the “China (Beijing) Free Trade Pilot Zone Foreign Exchange Reform Trial Implementation By-laws” (中国(北京)自由贸易试验区外汇管理改革试点实施细则), which permit banks registered and operating within the Beijing Free Trade Pilot Zone to undertake renminbi and forex derivatives transactions for offshore institutional clients.

Policymakers believe that permitting banks in Beijing to undertake renminbi and forex derivatives operations for offshore institutions will be of benefit to offshore enterprises raising the efficiency of their usage of funds in domestic forex accounts, and enabling them to better manage forex risk amidst normalisation of bidirectional volatility of exchange rates.

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