Bank of China Ltd, one of China's "big four" State-owned lenders, formed a tie-up with the world's largest futures exchange operator on Wednesday, through which the two parties will explore yuan settlement and clearing opportunities for commodities.
The cooperation agreement provides for trading in contracts related to oil, interest rates, grains and gold.
The pact includes a settlement and clearance membership in the derivatives marketplace CME Inc, and an application from Bank of China (Hong Kong) Ltd to become an offshore yuan settlement bank for CME, which is almost complete, said Si Xinchun, deputy general manager of the bank's corporate banking unit.
Si said although the current settlement and clearance relationship with CME doesn't include yuan business, the bank "would absolutely seek any chance to launch yuan-denominated settlement and clearance services if possible".
The two sides also agreed to cooperate more closely on offshore yuan deposit accounts and the participation of Chinese market players in overseas futures exchanges.
"It is very important for the bank to develop cooperation with CME on aspects of overseas futures trading, as the Chinese government is encouraging Chinese traders to get more directly involved with international futures trading," Si said.
"Once the preconditions for direct overseas futures trading mature, we will be the front-runner."
The bank's New York branch is applying for settlement membership in CME and preparing to become a deposit-holding bank for the exchange operator's clients.
It would use those deposits as collateral, said the lender.
It also plans to open a branch in Chicago this year to strengthen ties with the commodities market.
Since January, CME has included offshore yuan in the range of instruments eligible to meet performance bond requirements on all the exchange futures products cleared through CME Clearing.
HSBC Hong Kong will serve as its first Far East clearing custodian in Asia.
China has been encouraging its State-owned lenders to expand overseas and seek opportunities to settle commodity trades in yuan to broaden the currency's use worldwide.
The Wall Street Journal reported on Wednesday that banks in the southern Chinese city of Shenzhen have been approved to offer cross-border yuan-remittance services to individuals.
Individuals can make cross-border transfers of up to 80,000 yuan ($12,700) a day through accounts with the Shenzhen branches of those banks, the newspaper reported.
"The cross-border yuan business burgeoned last year, and overseas recognition as well as acceptance of the currency has improved steadily," Hu Xiaolian, deputy governor of the People's Bank of China said on Wednesday in a statement on the bank's website.
Yuan-denominated trade transactions more than tripled last year to 2.1 trillion yuan, according to central bank data.