(Bloomberg) -- A Chinese bank has launched the first money-market fund denominated in yuan that’s based in Europe, a milestone in the currency’s emergence as a major force in world markets.
China Construction Bank Corp.’s new exchange-traded fund, which is listed on the London Stock Exchange and available to investors throughout the European Union, is the first product to give Western investors access to securities in China’s interbank bond market. The fund, called the Commerzbank CCBI RQFII Money Market UCITS ETF, started trading Wednesday.
The ETF could be the first of many Chinese-currency funds to launch in developed markets as the country’s banks seek to attract investors with higher returns than they could get from dollar-, euro- or pound-denominated accounts.
“We are looking at a 3-to-3.5 percent range after taxes and fees,” said Tony Hung, the executive director at CCB International Asset Management Ltd., the division of China Construction Bank responsible for the ETF. “This is quite a stable rate of return. If the market grows, we would expect more providers.”
The yuan became the world’s fifth-largest currency for payments in November last year when it overtook the Canadian and Australian dollars, according to the Swift network. The country’s central bank is lobbying the International Monetary Fund to grant the renminbi -- as the yuan is also known -- the status of a reserve currency. If that happens at a review due later this year, the yuan would become the fifth currency that central banks are obliged to hold.

Yuan-Denominated

China Construction Bank, or CCB, is the only Chinese lender approved to process yuan in the U.K., although the country’s authorities could permit other financial institutions to clear the currency, a necessary step before setting up yuan-denominated products. The People’s Bank of China has authorized different lenders to handle the currency in other European countries, potentially enabling them to offer their own products.
Bank of China Ltd. and Industrial & Commercial Bank of China Ltd., which are approved to clear yuan deposits in Germany and Luxembourg, last week agreed to provide renminbi accounts to the customers of Clearstream Banking SA. That announcement also showed how the Chinese currency has increasingly become available to fund managers and companies during European trading hours.
Euroclear Bank SA will clear the ETF, while HSBC Holdings Plc will act as the custodian of the assets tracked by the fund. Commerzbank AG is the market maker.
“The product does not have too much to do with the Chinese government,” Hung said. “It’s CCB’s view that it’s the right time to launch this.”
To contact the reporter on this story: Will Hadfield in London at whadfield@bloomberg.net
To contact the editors responsible for this story: Nick Baker at nbaker7@bloomberg.net Rob Urban