The Swiss city of Zurich is set to be the hub of an offshore renminbi market soon as China and Switzerland sign a financial agreement to seal the deal.
The signing of the agreement occured on Jan. 21, Wednesday, as Chinese Premier Li Keqiang is expected to visit Zurich shortly. Premier Li has been invited to the World Economic Forum (WEF) at the Swiss ski resort of Davos to deliver a keynote speech on his country's economy and reform efforts.
According to a government representative who spoke with Xinhua, "a memorandum of understanding will be signed between the central banks of the two countries during Li's visit to Switzerland."
The official added: "It is an important step in the internationalization of the RMB, especially in Europe."
Since recent years, China's economy has jumped to the second spot as the world's largest economy. This distinction has made the country a leading exporter in the world market and the largest holder of foreign currency reserves, according to Swissbanking.
This development has led the Chinese government to make Zurich an offshore RMB market.
"Financial cooperation will be the brightest spot of Premier Li's visit to Switzerland," noted the government official, further adding that one of the main purposes of Li's visit is to "announce the plan to set up an offshore RMB market in Zurich."
The financial agreement is set to bestow upon Switzerland a target of 50 billion yuan ($8 billion) from its Qualified Foreign Institutional Investor (QFII) plan. The currency would be used to create an offshore RMB market in Zurich and at the same the establishment of the first Chinese bank for RMB clearances in the future.
In July 2014, both central banks have signed a bilateral currency swap agreement of 150 billion yuan ($24 billion). The currency agreement was in support of trade and investments between the two economies. It has also paved the way for the "development of a renminbi market" in the country.
Once signed, Switzerland would join other renminbi market hubs such as London and Hong Kong.