* China seen tackling convertibility issues
* Yuan clearing begins in Singapore commods hub
By Emma Farge
GENEVA, June 6 (Reuters) – China’s yuan will become a key currency for trade in commodities over the next few years and has already begun making inroads into the U.S. dollar’s dominance in Asia, according to bankers.
As the world’s top consumer of commodities such as base metals and rubber, China is expected increasingly to dictate the terms for its imports, they said this week on the sidelines of Euromoney’s Global Commodities Finance Conference in Geneva.
“Do you think China will just go along for the ride on the U.S. dollar forever? No, they will exert pressure and the renminbi (yuan) will gradually confirm its position as one of a leading trade currency even for commodities,” said Jean-Francois Lambert, global head of commodity and structured trade finance at HSBC.
Bankers said the top impediment to commodities trade in the yuan was its lack of convertibility.
But China’s new leaders have signalled they may want to change this and financial centre Shanghai said this week it expects to gain approval soon to open a free trade zone to test yuan convertibility.
“At the moment it’s still difficult to find people who want the offshore renminbi but that will change in 3-5 years,” said Simon Tyler, head of corporate banking at China Construction Bank.
“There will be a lot more LCs (letters of credit) for commodity imports for China such as sugar and soybeans. That’s already happening,” he added, referring to the growing number of finance guarantees being sent out in the Chinese currency.
Bankers and traders at the conference also said the introduction of renminbi clearing services last month in Singapore – a major commodities trading hub – could help promote broader use of the currency.
Bank of China and futures exchange operator CME Group signed an agreement last year to expand the use of the Chinese currency in settling some commodities trade. (Reporting by Emma Farge; Editing by Mark Potter)