Dubai's bid to become an offshore trading centre for the yuan has the backing of senior bankers and the head of the financial regulator for Hong Kong, the leading clearing centre for the currency outside of mainland China.
Norman Chan, chief executive of the Hong Kong Monetary Authority (HKMA), said Dubai could follow in Hong Kong's footsteps as the Middle East's growing trade links with China generated demand for banking services in the yuan, or renminbi as it is also known.
Jonathan Morris, chief executive of Standard Chartered in the UAE, said the UAE had the "fundamentals" to become a regional clearing centre for the currency.
The pair were in Dubai yesterday as part of the HKMA's roadshow to promote greater use of the yuan.
"Dubai has a competitive edge in terms of managing flows in the region and around the region," Mr Chan said. "There's potential for growth as customers in the GCC region and north-east Africa need those services."
China started implementing a strategy in 2009 to internationalise the currency, granting powers to Hong Kong to become the first location outside of mainland China for clearing yuan. Hong Kong has developed rapidly as the offshore yuan business centre, serving as the global base for yuan trade settlement, financing and asset management. The move has helped to generate some 700 billion yuan (Dh412.9bn) in deposits and certificates of deposits at the end of last year, up by more than 1,000 per cent from the end of 2009.
Dubai is vying with London and Singapore to become the next location for yuan trading.
Senior officials from the Dubai International Financial Centre (DIFC) have urged the Central Bank to change regulations to help the emirate's cause.
The yuan accounts for a low single digit amount of total deposits in the financial system.
But senior bankers believe the strong uptick in trade that is forecast between the Arabian Gulf region and China will help to create demand for yuan services from companies, banks and individuals.
"We see absolutely reason why it shouldn't happen," Mr Morris said. "We strongly believe that the UAE has all the necessary fundamentals and is very well placed to become the hub for renminbi clearing in the Middle East and Africa."
Emirates NBD in March last year became the first bank in the Middle East to issue a bond sale denominated in yuan.
Mr Chan said the scope for Dubai's development as a yuan centre was more limited than for Hong Kong, as Hong Kong is part of China.
"The UAE and the GCC have very huge potential in terms of bilateral trade links in the future so this is a very exciting period with huge potential for growth," Mr Chan said.
