China Builds a Golden Yuan Bridge into Europe

Contents

1. The Yuan Goes International Piggy-Backing Gold
2. Step By Step
3. Final Comment

Deutsche Bank Becomes Europe’s First Non-Chinese Renminbi Clearing Bank

Authored by GoldFix

Golden Yuan: We believe this is a major secular trend and as assets (Gold) start to trade in local currency (Yuan) due to policy changes (China buying Gold for Yuan backing) that asset’s relationship with the local currency tightens and becomes more robust while they are buying.

-GoldFix 2023

China just got its wish. The Renminbi is going international, European to be exact. The PBOC just appointed Deutsche Bank to be the firs EU clearing firm to handle the RMB in the push to internationalize the currency.

The Yuan Goes International Piggy-Backing Gold

The appointment, first reported by the Financial Times, gives Deutsche a direct connection to China’s financial system as Beijing accelerates efforts to expand the renminbi’s use in international trade, investment and financing.

“This establishes a direct bridge into China’s financial system and strengthens our ability to support clients engaged in Europe-China trade and investment flows,” said Leo Yin, president of Deutsche Bank China.

Deutsche said the designation reflected the renminbi’s “continued internationalization” and the bank’s growing role along major China-Europe commercial corridors. Most overseas renminbi clearing banks are local branches of China’s four largest state-owned lenders.

Yin said European companies could use the service to reduce “currency friction” and simplify supply-chain payments. Chinese companies could also finance European investments and conduct cross-border trade while remaining within the renminbi system.

The appointment deepens financial ties even as Germany encourages domestic companies to reduce their dependence on China. About 5,000 German businesses still operate in the country, including Volkswagen, Siemens and numerous Mittelstand manufacturers.

Deutsche joined China’s Cross-Border Interbank Payment System (CiP), Beijing’s alternative to Swift, as a direct participant in 2015. It is also the highest-ranked non-Chinese bank for panda-bond transactions this year, according to Bloomberg data.

Beijing has made progress expanding renminbi-denominated trade and offshore borrowing, particularly as historically low Chinese interest rates encourage multinational companies to issue panda and dim sum bonds. However, the currency’s share of global reserves remains limited, with foreign investors citing low yields, slowing growth and China’s rising debt burden as obstacles to larger allocations.

The significance of this can not be overstated. It is the CCP’s desire to internationalize the Yuan for better trade amongst its BRI partners and in doing so intentionally or not challenge the USD as a world reserve currency.

We have been talking on this topic for years here in combination with the appreciation of Gold as a necessary by product of this. It’s good to see this coming of age.