Dec 26 The United Arab Emirates plans to establish a centre for clearing transactions in the yuan, the central bank said on Saturday, becoming the second country in the Middle East to do so as China’s economic ties with the region boom.
Qatar opened the region’s first such clearing centre, which can handle all stages of a currency transaction, in April.
The announcement by the UAE, the second largest Arab economy after Saudi Arabia, follows the International Monetary Fund’s decision last month to admit the yuan into its Special Drawing Rights basket. This could help encourage other countries to use the currency for reserves, trade and investment.
Sheikh Mohammed bin Zayed al-Nahayan, the Crown Prince of Abu Dhabi, signed a memorandum of understanding for the planned UAE clearing centre when he visited China earlier this month, the central bank said in a statement.
During that visit, China and the UAE renewed a three-year agreement to swap up to 35 billion yuan ($5.42 billion) worth of their currencies, and China included the UAE in its RMB Qualified Foreign Institutional Investor scheme.
The central bank did not say when the UAE clearing centre might be established or give further details.
At present, most of the Gulf’s wealthy oil and gas exporters’ currencies are pegged to the dollar, and most of their huge foreign currency reserves are denominated in dollars.
But the yuan looks set to play a growing role in trade, investment and financing. Trade between China and the UAE has been expanding at an average annual rate of about 35 percent in the past decade and may hit $16 billion this year, China’s official Xinhua news agency reported.
In another sign of growing regional interest in the yuan, the Dubai Gold and Commodities Exchange said last month it would launch a yuan futures contract in December, subject to regulatory approvals.