Yuan gains ground on euro and dollar as reserve currency

The Chinese yuan is accelerating on its path to becoming fully convertible and could rival the euro and dollar within the next five to seven years, according to HSBC, the Europe's biggest bank.

HSBC has been attempting to steer clients in the Middle East towards business accounts denominated in the yuan since July, and has opened between seven and 10 accounts a week for UAE clients seeking to settle trades with Chinese clients.

The new impetus for an alternative reserve currency comes as debt worries engulf the euro zone and the US.

"We're so fixated on the crisis in the West, but the Chinese are doing something very exciting and very new," said David Bloom, HSBC's global head of foreign exchange strategy.

Two weeks ago, restrictions were lifted on Chinese companies seeking to import using the yuan.

"Now every company in China can use the [yuan] to import," said Nick Levitt, HSBC's head of commercial banking in the UAE. "Anyone trading with China has to start thinking about this seriously."

However, restrictions remain on the conversion of foreign currencies into yuan - meaning yuan can be traded for US dollars but not vice versa - restricting its appeal.

Mr Levitt said Middle Eastern petrochemicals companies, raw materials producers and hotel companies were among those expected to take greater interest in the yuan as a currency for trade settlement.

ghunter@thenational.ae