China’s central bank is set to announce that Bank of China’s (601988.SH, 3988.HK) Hong Kong branch will be the territory’s only approved renminbi-clearing bank, dashing hopes that other lenders might also be allowed to settle renminbi transactions, the Wall Street Journal reported. The People’s Bank of China will soon renew its contract with Bank of China Hong Kong (Holdings) to continue its pivotal role as the only approved financial institution to clear offshore yuan transactions until 2016 – a status it has held since 2003. The move may reflect a cautiousness among China’s financial policy elite, despite recent moves to increase the scope of financial products and mainland investment channels for the territory’s offshore renminbi market. “It’s easier for authorities in Beijing to control the offshore yuan market, such as interest rates and other policy decisions, if the clearing role is restricted to an institution with Chinese backing instead of a foreign bank,” said Frances Cheung, a senior strategist at Credit Agricole.
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