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NOTE: I don't come from a finance background i.e. I'm an idiot in this topic.

Recently China announced that the Bank of China and ICBC will become designated RMB "clearing banks" in my home country, Singapore.

Based on responses from the ground, it appears that there are some "money-making" opportunities for local businesses/companies etc. and that we should start opening RMB accounts with these banks to "reap the benefits".

But being illiterate in this, could someone explain what are the benefits, how it is derived (the theory and logic behind it) and how to react to this event in order to take advantage of it?

Many thanks!

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For an individual there will not be much impact immediately.
This arrangement will help Corporates and Banks settle payments more easily.
- It would typically help companies dealing with Yuan [Buying or selling to China or Countries that accept Yuan as payment] to make payments at a cheaper cost & in less time.
- In the near future it would make it easier for companies to invest more into China financial markets
- It would also open up / create new market for derivatives and other allied products
- It would also make Singapore a market place for Yuan outside China [and Hong Kong] resulting in more money and related product.

In a related move this would make it easy for Singapore Central Bank to invest in China.

Once the markets matures more, there could be some products for Individuals.

  • Thanks Dheer, although you did make it sound kind of unexciting. But I probably still look forward to see how it turns out. Thanks for the explaination again. – Jake Apr 21 '11 at 13:50
  • @Jake: Sorry to dissapointe you. This is definately more exiting right now for merchants, Banks and traders. This is more similar to Singapore allowing / establishing USD check clearing [sometime couple of years back] with Citi Bank acting as an clearing house. – Dheer Apr 21 '11 at 14:32
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I strongly urge you against this despite the fact that you may enjoy lucrative interest rates in the short run.

Considering the reckless usage of deposits and other public monies to build buildings just to claim that gdp is high (they count the cost of real estate as investment not their final sales as the rest of the world does), all depositors in Chinese banks stand to lose or at least have their funds frozen (since all credit funding the real estate building comes from the banks and taxes & land seizures to a lesser degree).

China's reckless building: http://www.youtube.com/watch?v=wm7rOKT151Y

East Asian Crisis (Chapters 11 & 12): http://www.pbs.org/wgbh/commandingheights/lo/story/ch_menu_03.html

This can be prolonged if they open their financial system to outside funding, but that will also amplify the effect.

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