Home / Industry / Malaysia’s central bank works with PBOC to start yuan clearing

Kuala Lumpur: Malaysia’s central bank is working with its Chinese counterpart to introduce yuan clearing in the Southeast Asian nation after bilateral trade surged more than 10-fold since the start of the last decade.

Bank Negara Malaysia signed a memorandum of understanding with the People’s Bank of China on Monday to coordinate and cooperate on the supervision of the yuan business, it said in an e-mailed statement. It didn’t say which lender would be appointed as Malaysia’s clearing bank for yuan, nor did it give a start date.

Trade between the two nations has increased by 20% annually over the past two decades to exceed $100 billion in 2013, according to Bank Negara, and leaders of the two nations in May set a goal of increasing this to $160 billion. Yuan deposits in Malaysia have surged more than 10-fold since 2010 to 10.7 billion yuan ($1.7 billion) and China’s currency is increasingly being used for commerce.

“The designation of a yuan clearing bank is an important precondition for a pooling of yuan liquidity in the Malaysian financial system," the central bank said in its statement. The move will allow domestic lenders to offer competitive rates to companies seeking yuan for trade and investment, it said.

Malaysia was the first central bank in the Association of Southeast Asian nations to set up a yuan swap line with the People’s Bank of China, securing an 80 billion yuan facility in February 2009 and the size was raised to 180 billion yuan in 2012, Bank Negara said. The ringgit has been traded in the China Foreign Exchange Trade System since 2010.

China started direct trading between the yuan and the Singapore dollar in October, after making the euro exchangeable for its currency in Shanghai in September. Similar links exist for the US, Australian and New Zealand dollars, the British pound and Japan’s yen. Bloomberg

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