Seoul announced the intention to create its own clearing system that will process yuan payments. Thus, South Korea will expand the list of countries with direct access to trade in the Chinese currency. The People’s Bank of China approved and signed a memorandum of understanding (MOU) with the Bank of Korea during Chinese President Xi Jinping's visit to South Korea. However, it is unclear in what terms the project will be implemented since the timescale was not disclosed. Yet, experts say that interested parties are unlikely to delay the realization of their financial goals.
A clearing system, also known as a clearing house, acts as the middleman between two different parties, and is also the agent through which financial instruments such as shares, bonds and currencies are traded.
Taking into account the growing popularity of the renminbi, urgency of the project is hard to overestimate. The world’s leading financial hubs are implementing such projects. For example, the central bank of France signed the memorandum of understanding with the Chinese regulator on establishing a yuan settlement mechanism. Prior to that, Bank of China was entitled to provide yuan clearing service in Frankfurt am Main. Germany and China agreed on this back in March during the visit of President Xi Jinping to Germany. In London, the first clearing bank for RMB will be China Construction Bank.
