Sydney yuan hub status a windfall for importers

Australian importers are in line for a windfall after President Xi Jinping used his visit to the country to anoint Sydney as a yuan trading centre.

The ability to exchange Australian dollars directly into yuan, rather than first converting them into US dollars, will save companies as much as 7 per cent on deals with China, according to HSBC.

Chinese investment into Australia has the potential to increase seven times to almost US$300 billion by 2020 through the yuan hub and measures such as the free-trade agreement sealed yesterday, Westpac Banking says.

"We anticipate that we will see more financial activity in [yuan] as liquidity increases and the market embraces the benefits of dealing directly with a clearing bank in Sydney," Rob Whitfield, the chief executive of Westpac Institutional Bank, said yesterday. "We are reaching a tipping point as customers across Asia, New Zealand and Australia are increasingly seeking more [yuan] products and services."

Sydney follows cities from London to Singapore that have established centres for dealing the yuan, which surpassed the euro last year as the most widely used currency in trade finance after the US dollar.

Australia has more to gain than most other developed economies from an accord on the yuan. The correlation between the Australian dollar-US dollar exchange rate and the US dollar-yuan rate is the highest after the yen among the Group of 10 currencies. The relationship has increased to 0.91, from about zero two years ago, as Australia deepened its trading ties with the world's second-largest economy.