Global Market: China broadens Yuan FX clearing in push for global currency use

China has expanded its central clearing system to cover spot yuan transactions against three additional foreign currencies, marking another step in Beijing’s efforts to promote wider international use of the Chinese currency, Reuters reported.

Shanghai Clearing House began offering central counterparty clearing services for spot transactions involving the Singapore dollar, New Zealand dollar and Thai baht on September 14, Reuters reported, citing a statement from the clearing house.

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Trading in the three newly added currencies totalled about 996 million yuan ($148.49 million) on the first day, the news agency stated. Twelve banks participated in the initial session, according to the report.

The Shanghai Clearing House said the expansion was intended to support the development of Belt and Road currencies in China’s interbank foreign exchange market while broadening the reach of its foreign-exchange clearing services.

Central counterparty clearing places a clearing house between buyers and sellers, helping reduce counterparty risk and streamlining settlement. The clearing house said its services have helped release trading credit limits for market participants in a timely manner, boost trading activity, improve clearing and settlement efficiency and support centralized risk management.

The latest expansion adds the Singapore dollar, New Zealand dollar and Thai baht to currencies already covered by Shanghai Clearing House for spot yuan transactions. The existing list includes the U.S. dollar, British pound, Hong Kong dollar, Japanese yen, Australian dollar and euro, Reuters reported.

The move comes as China continues to develop infrastructure designed to facilitate direct yuan trading and settlement with a broader range of trading partners. Expanding clearing arrangements can make it easier for financial institutions to conduct transactions in yuan and local currencies without relying as heavily on intermediary currencies.

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The initiative also comes against a backdrop of efforts by Chinese authorities to deepen the yuan’s role in international trade and finance. Reuters reported earlier this week that China’s foreign exchange regulator has been encouraging banks to promote greater use of currency hedging among companies as the yuan has strengthened this year.

The latest clearing expansion therefore adds another layer to China’s broader push to strengthen the yuan’s use in cross-border transactions and build greater liquidity in yuan-linked foreign exchange markets.

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