DOHA: Qatar opened the Middle East’s first centre for clearing transactions in the Chinese yuan on Tuesday, saying it would boost trade and investment between China and Gulf Arab economies.

“The launch of the region’s first renminbi clearing centre in Doha creates the necessary platform to realise the full potential of Qatar and the region’s trade relationship with China,” Qatar’s central bank governor Sheikh Abdullah bin Saud al-Thani said at a ceremony.

“It will facilitate greater cross-border renminbi investment and financing business, and promote greater trade and economic links between China and the region, paving the way for better financial cooperation and enhancing the pre-eminence of Qatar as a financial hub in MENA (Middle East and North Africa).”

Industrial and Commercial Bank of China’s (ICBC) Doha branch is the clearing bank for the centre, which intends to serve companies from around the Middle East.

A clearing bank can handle all parts of a currency transaction from when a commitment is made until it is settled, reducing costs and time taken for trading.

The centre “will improve the ease of transactions between companies in the region and China by allowing them to settle their trade directly in renminbi, drawing increased trade through Qatar and boosting bilateral and economic collaboration between Qatar and China,” said ICBC chairman Jiang Jianqing.

At present, Qatar and the Gulf’s other wealthy oil and gas exporters use the US dollar much more than the yuan. Most of their currencies are pegged to the dollar, and most of their huge foreign currency reserves are denominated in dollars.

This is largely because their energy exports to China are mainly denominated in dollars, the currency of choice in oil and gas trade. The yuan is not a fully convertible currency, limiting its attraction for use in central bank reserves.

But the Gulf’s non-oil imports from China have been growing rapidly, and banks servicing the trade may want to use Qatar’s clearing centre rather than having deals cleared in Shanghai or Hong Kong. Total two-way trade between China and Qatar tripled between 2008 and 2013 to around $11.5 billion.

Published in Dawn, April 15th, 2015

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