NEW YORK • Morgan Stanley and Citigroup are among those vying to be the designated bank clearing yuan trades in the United States alongside Bank of China (BOC), China's fourth-biggest bank by assets, a senior BOC executive said.
Appointing banks to clear yuan trades is part of China's drive to encourage worldwide use of the currency, also known as the renminbi, which it hopes would some day supplement or rival the US dollar as a global reserve currency.
Unlike other countries where China is also trying to expand the yuan's reach, the US will have two banks to clear yuan trades, Mr Xu Chen, president and chief executive officer of BOC, said in New York on Wednesday.
This is in part because the advocacy group led by former New York mayor Michael Bloomberg, which has championed wider usage of the Chinese currency in the US, had asked China to allow a US bank to clear yuan trades in the country, Mr Xu said.
China usually designates just one Chinese bank to clear all yuan trades in each country outside its borders.
Mr Xu said Morgan Stanley and Citi are both looking into submitting their respective bids to the Chinese central bank, the People's Bank of China.
The sheer volume of trade should help catapult the US into the second- largest offshore yuan clearing centre after Hong Kong in three to five years, said Mr Xu Chen, president and chief executive officer of BOC.
"Based on our understanding, the (advocacy) group suggested to the People's Bank of China (PBOC) that it adopts the approach of appointing one Chinese bank and one US bank," said the BOC president.
The sheer volume of trade should help catapult the US into the second-largest offshore yuan clearing centre after Hong Kong in three to five years, he added.
BOC was appointed only last month as the designated bank to clear yuan transactions in the US, which can currently be cleared through Hong Kong, London or Singapore, the major yuan clearing centres outside China.
To that end, BOC plans to expand its yuan trading desk in New York and sell yuan hedging services in the city before year end, Mr Xu said.
Morgan Stanley and Citi declined to comment. The PBOC was not immediately available for comment.
Despite strong trade ties between China and the US - the world's two largest economies - Beijing has been slow in making inroads to set up a yuan market in the US, compared with other countries.
Chinese and US officials have said this is partly due to a desire by some within the US government to protect the dollar's status as the world's pre-eminent currency.
The US was China's largest bilateral trade partner last year, with US$558 billion (S$775 billion) worth of goods and services exchanged between the two countries, Chinese data showed.
The advocacy group for the yuan includes JPMorgan Chase, Wells Fargo and Bank of America as its members.
The yuan was the fifth-most-active currency for global payments in July, accounting for 1.9 per cent of the market share, according to global transaction service provider Swift.