Yuan Makes Strides in Dubai
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PAGE 10 CHINA DAILY ASIA WEEKLY JULY 5-11, 2013 CoverStory Yuan makes strides in Dubai IN JUST A FEW YEARS THE CURRENCY HAS BECOME A KEY PLAYER IN THE MIDDLE EAST’S FINANCIAL CENTER By SUDESHNA SARKAR in Hong Kong [email protected] Though the event happened three years ago, Haytham El Maayergi doesn’t have to pause for a moment to recollect the date. It is imprinted on his mind, being a landmark trans- action not only for Standard Char- tered Bank, where he is head of trans- action banking for the United Arab Emirates, but in the banking history of the entire Middle East as well. “In October 2010, we opened a yuan account in Dubai for the retailer Rivoli,” he says. “This put Standard Chartered on the map as the fi rst foreign bank in the Middle East to open a yuan account for a corporate in the region.” The Rivoli Group, a luxury retail AFP chain headquartered in Dubai Emirati employees work at the with over 120 international brands Standard Chartered Bank’s including Gucci, Bvlgari and Omega, trading room at the Dubai started the pathbreaking account to International Financial Centre. promote itself to Chinese buyers. It was the fi rst foreign bank With access to end-to-end yuan to off er yuan accounts in the trade settlement services, clients can Middle East. expect a shorter settlement cycle for goods and services, increased con- trol, and transparent pricing, says “In 2012, Standard Chartered UAE Of them, ICBC alone reportedly al funding sources in Europe. The ible alternative until it is freely fl oat- Farooq Siddiqi, head of Standard saw a 750 percent leap in its yuan conducted yuan transactions valued 750 million yuan three-year notes ing.” Chartered’s transaction banking in transactions over 2011, a signifi cant at $2.1 billion in the inter-bank mon- had HSBC, Standard Chartered and While policymakers often think the Middle East and North Africa. growth for the business,” notes El ey market in the fi rst half of 2012. Emirates NBD Capital as the book- that managing currency fl uctuations Three years down the line, the Maayergi. Yuan deals between China and the runners. reduces risk, currency traders view bank in the UAE has a diverse port- By 2020, the Economist Intelli- UAE have also been facilitated by However, with Singapore vying to this diff erently, he adds. folio of about 100 yuan account hold- gence Unit assesses that China will the 35 billion yuan ($5.5 billion) cur- eclipse Hong Kong as a yuan trading “It is risky because it is managed. ers. Charles Tan, the lender’s regional be the most important economic rency swap agreement signed last hub and London too announcing its At some point, when the manage- product manager, says they include partner of the GCC. Nearly 70 per- year and the DIFC introducing a pay- plan to join the fray, a Dubai-based ment stops, there could be a big Chinese State-owned enterprises, cent of all Sino-Arab trade takes ment system to allow clearings and economist points out the challenges move. I have long recommended global fi rms and local companies. place through Dubai. settlements in yuan. the emirate faces in becoming a yuan that (the authorities) move sooner While Chinese businesses are nat- Besides the growing China-UAE nerve center. rather than later to liberalize their urally inclined to trade in the domes- Growing infl uence trade, the boom in yuan settlements Campbell R Harvey, from the currency regime. tic currency, their business partners Soon after Standard Chartered in Dubai is also because of the emir- Fuqua School of Business at Duke “I think that China realizes this. are also following suit now, as yuan became the fi rst foreign bank in the ate’s strategic position as a gateway University in Dubai, says that while They are taking small steps towards transactions cut down foreign Middle East to off er yuan accounts, to Africa. Dubai can be a yuan hub because of fully liberalizing.” exchange risks and enable them to others began to follow suit, indicat- “This is a center for regional trade,” the increasing importance of trade Standard Chartered, which get discounts where possible. They ing the growing influence of the El Maayergi says. “Customers from with Africa and the Middle East became the fi rst foreign bank to be also simplify documentation. yuan. They include HSBC; local China can export to other countries, in general, the huge growth in US appointed as the agent and settle- “The direction is clear,” says El bank Mashreq; and Emirates NBD, especially in Africa, though Dubai.” domestic oil production will lead to ment bank for yuan cross-border Maayergi. “With trade between the Dubai’s largest bank. “China is the biggest investor into a decrease in dollar trade with the trading in China in 2009 and also the UAE and China growing larger, peo- Emirates banks have also begun Africa, and much of that activity is Middle East. fi rst bank in South Korea to facili- ple are interested in more transac- taking their business to the yuan now out of Dubai — it’s very much “Direct yuan trades reduce the tate a cross-border yuan transaction tions in yuan. Look at the progress heartland. The Union National Bank the chosen platform for Chinese cost of doing business,” Harvey says. between the two countries the fol- (of the yuan trade) in just a few years. was the fi rst to open a representa- companies to invest into Africa,” “Even if Dubai gets (to be the off- lowing year, is robustly optimistic. It will grow more internationally as tive offi ce in Shanghai in 2007. Since DIFC chief economist Nasser Saidi shore trading) center, it will not be “Dubai as a city is qualified to more people trade in it, especially then the National Bank of Abu Dhabi said at a press conference in Dubai. exclusive for long. If China wants become a yuan hub and we are well in the UAE, which is a key trading has established representative offi c- “(Though) yuan trading accounts to be a world currency leader, it is positioned to support the govern- partner of China.” es in Shanghai and Hong Kong, and for only about 4 percent of our over- hard to imagine not having a center ment’s plans towards that develop- According to the UAE Ministry of Emirates NBD opened its Beijing all trade, given the vast volume of in London.” ment,” El Maayergi says. Foreign Trade, China was the fed- offi ce last year. bilateral trade, there is every reason “At the end of the day, we need eration’s second largest trade part- Chinese lenders have returned the for the scope to expand rapidly.” Managed currency to look at the yuan’s global liquid- ner in 2012. Bilateral transactions compliment with three banks setting While the UAE market is not yet Besides competition, the other ity and acceptance,” adds Standard jumped to about $15.6 billion from up shop at the Dubai International deep enough to see the fl oating of major challenge, Harvey says, is that Chartered’s Tan. $3.12 billion in 2002. The growth will Financial Centre (DIFC), the state- ‘dim sum’ bonds, there are off shore the yuan is not free fl oating, but is “We see the Chinese government be greater once China and the six- administered federal fi nancial free issuances in Hong Kong. managed. taking steps in the right direction to member Gulf Cooperation Council zone. These are the Industrial and Last year, Emirates NBD became It is very unlikely that a managed internationalize the yuan. The open- (GCC) conclude a free trade agree- Commercial Bank of China (ICBC), the Middle East’s first issuer of currency can compete in the long ing up of the market will correspond ment, negotiations for which started Bank of China and Agricultural Bank off shore yuan bonds as Gulf fi rms run over the dollar, euro or yen, he to the pace (at) which this is being in 2004. of China. sought to diversify from tradition- points out. “The yuan is not a cred- done.”.