Swiss and Chinese strengthen financial cooperation

Cementing relations: Swiss Finance Minister Eveline Widmer-Schlumpf and Zhou Xiaochuan, Governor of the People’s Bank of China Keystone

Finance Minister Eveline Widmer-Schlumpf and China’s central bank governor, Zhou Xiaochuan, discussed Swiss plans to become a renminbi hub at meetings on Thursday and Friday in Switzerland.

Renminbi is the name of China’s official currency – the units are known as yuan. Global renminbi (RMB) transactions are gathering pace and the currency is emerging as an international reserve currency competing with the dollar, euro and British pound.

In December 2012, the Swiss government officially announced its intention to become a renminbi hub, joining the likes of Britain, Canada, Germany and France in trying to woo Beijing. Swiss banks very strongly support the move, said the Swiss Bankers Association (SBA) in a statement on Friday.

An initial financial dialogue between Switzerland and China was held in Shanghai in December 2013. The second meeting between the authorities took place on Thursday in Bern, and on Friday in Zurich a roundtable meeting was held for financial sector leaders and government authorities from the two countries. Widmer-Schlumpf was accompanied by Swiss National Bank Chairman Thomas Jordan on Friday.

Swiss banks are greatly in favour of a currency agreement between the Swiss National Bank (SNB) and the People’s Bank of China, and thus for clearings through a Chinese bank based in Switzerland, the SBA statement continued. Efforts are under way which might eventually lead to the establishment of a renminbi-Swiss franc swap line.

The attendees at the meeting made it clear that Swiss banks would welcome Chinese banks in Switzerland and that the Swiss authorities would be open to considering possible applications by Chinese banks.

Win-win

“An international swap line for the Chinese and Swiss currencies would be very welcome. It would assure liquidity for a Swiss-based Chinese clearing bank and it would increase the trust of market participants. Corporations and small and medium enterprises in Switzerland would benefit from greater proximity and operations in their own time zone,” said Patrick Odier, Chairman of the Board of Directors of the SBA, in the communiqué.

“In short, Switzerland as a renminbi hub is a win-win situation for both China and Switzerland.”

Chen Yuannian, Secretary General of the China Banking Association (CBA), said: “The Swiss Financial Center has expanded renminbi business extensively, serving clients in China, Switzerland and elsewhere in the world. This is favourable for not only the development of Swiss enterprises but also for the internationalisation of the renminbi”.

The SBA and the CBA have signed a memorandum of understanding as a “sign of their mutual understanding and willingness to proceed on the chosen path”, according to the SBA.

Economic ties in general have been increasing between Switzerland and China, A free trade agreement was signed by the two countries in 2013 and will enter into force on July 1, 2014.