The Bank of China's lucrative monopoly of yuan forward contracts business is coming under threat as other state and commercial banks lobby the People's Bank of China for a share of the market.
Banking sources said the Industrial and Commercial Bank of China, China Construction Bank, and Agricultural Bank of China and smaller banks had stepped up pressure on the central bank to allow them to offer the service to their clients.
The renewed pressure comes amid growing expectations the yuan will be allowed to trade within a wider band to reflect market forces, thus generating more business for banks.
'There will be even greater demand for the contracts to hedge against currency risks if the yuan is allowed to trade in a wider band. So, naturally, all the big boys want a share of the pie,' a foreign banker said.
An Agriculture Bank official said: 'As it is now, there is a great demand for these contracts by our clients.' About two years ago, Beijing chose Bank of China to pilot the scheme to carry out yuan forward contracts for customers that need to hedge against currency risks, even though the range in which the yuan is allowed to fluctuate remains tightly controlled by the central bank.
Until recently, it was the nation's foreign exchange bank and was thus seen to have the expertise to handle the new field, especially since the yuan was under threat from speculators at the time of the launch.
Foreign currency analysts said the yuan's exchange rate against the US dollar, now at about 8.28 to the US unit, was tightly controlled by the central bank by a ceiling or floor of 0.3 per cent.