France plans currency swap line with China

France intends to set up a currency swap line with China to make Paris a major offshore yuan trading hub in Europe, competing against London, the China Daily on Saturday cited Bank of France Governor Christian Noyer as saying. Yuan deposits in Paris amount to 10 billion yuan ($1.6 billion), making it the second largest pool for the Chinese currency in Europe after London.
Almost 10 percent of Sino-French trade is settled in yuan, also called the renminbi or RMB, according to French data cited by the official newspaper. "The Bank of France has been working on ways to develop a RMB liquidity safety net in the euro area with due consideration of a supporting currency swap agreement with the People's Bank of China," Noyer told the English-language newspaper.
The yuan's internationalisation and bilateral financial co-operation could be among the main topics during French President Francois Hollande's visit to China in late April, the paper said. French Foreign Minister Laurent Fabius paid a two-day visit to Beijing this week.
The planned swap line would be the latest in a string of bilateral currency agreements that China has signed in the past three years to promote use of the yuan in trade and investment. It followed a similar step by the Bank of England to set up a reciprocal three-year yuan-sterling swap line with China. Britain, always anxious to maintain London's status as Europe's biggest financial centre, launched an offshore yuan currency and bond market to great fanfare last year.
Noyer said Paris has been committed to strengthening its position in corporate bonds and short-term negotiable debt securities markets as well as the associated trading infrastructure, to promote wider use of the yuan. In 2011 and 2012, the total value of offshore yuan-denominated bonds issued by French corporates was nearly 7 billion yuan, twice the value of bonds issued by their British counterparts, according to a report by Paris Europlace, an association that supports the French financial industry and promotes Paris as an international financial centre.
A survey by the association, the China Daily reported, also showed that 50 percent of French companies have used yuan-denominated products and services. European and US officials have for years been pressing China to do more to open up the yuan to international markets, saying its artificial weakness was one of the key imbalances of the global economy.
However, the Obama administration again stopped short of labelling the world's No 2 economy as a currency manipulator in its latest semi-annual report. Beijing is gradually allowing a degree of flexibility in the yuan's value, though it still keeps a tight rein on gains in the currency for fear it will weaken its export-powerhouse economy, which has been the biggest engine of global growth for a decade.