Bank Of China, CME To Begin Commodity Trade Settlement In Yuan

Bank of China Ltd. (601988.SH) and futures exchange operator CME Group Inc. (CME) signed a memorandum of understanding Wednesday to begin settling commodity trades in the yuan, further expanding the use of the Chinese currency outside China's borders.

The two parties will also enhance cooperation in yuan clearing, offshore yuan custody and futures settlements, according to the memorandum, which was posted on the Bank of China website.

Bank of China's futures unit, BOC International Futures Ltd., became the first Chinese clearing member of CME Group, which operates the Chicago Board of Trade, the Chicago Mercantile Exchange, and the New York Mercantile Exchange.

CME Group said in December it will accept offshore Chinese yuan as collateral on all futures products it clears, expanding the yuan's presence in the $4 trillion-a-day currency markets.

China has been eager to expand the role of the yuan as an international currency, hoping to make it a major reserve currency in the future, despite continued controls on the capital account. It has pushed hard to expand trade settlement in yuan and allowed yuan bank deposits in Hong Kong.

-Yue Li contributed to this article; Dow Jones Newswires; (8621) 6120 1200; yue.li@dowjones.com

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