Deutsche Bank is first in Europe granted right to clear settlements in yuan: what this means for the dollar

Deutsche Bank has been granted official yuan clearing bank status in Frankfurt by the People's Bank of China. It has become the first European bank with such authority.

The new status will enable Deutsche Bank to directly clear settlements in the Chinese currency for European companies and financial institutions. Until now, this role outside China has been mainly carried out by subsidiaries of major Chinese state banks.

What this means for businesses

European companies dealing with China will find it easier to conduct payments directly in yuan. Deutsche Bank will be able to handle such settlements and provide clients with access to yuan liquidity.

This creates an additional channel for trade with China without the mandatory use of the dollar in transactions where the parties are ready to settle directly in the Chinese currency.

What this means for the dollar

China has been expanding the use of the yuan in international trade and payments for many years. The easier it is for companies to settle directly in the Chinese currency, the less need there is to use the dollar as an intermediary currency in certain transactions.

However, it is still too early to speak of Europe abandoning the dollar or of a serious threat to its status. Deutsche Bank's decision primarily expands settlement infrastructure and makes the yuan more convenient for European businesses.

The dollar remains the world's primary currency for international settlements and reserves. But the emergence of the first bank in Europe with such status outside the Chinese banking system shows that Beijing is steadily expanding the opportunities for using the yuan in the international market.

Based on materials from: Deutsche Bank, Financial Times