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Dubai commodities exchange deals with Chinese banks could lead to yuan transactions

The Dubai Gold and Commodities Exchange (DGCX) has signed agreements with two Chinese banks to boost trade in precious metals and commodities between China and the Middle East and support cross-border derivatives business in the Middle East and Asia.19 Apr 2016

The agreements could eventually lead to the clearing of yuan-based transactions in Dubai, the exchange said.

An agreement with the Dubai  International Finance Centre (DIFC) branch of the Agricultural Bank of China (ABC), one of China's biggest state-owned commercial banks, will focus on product development, strategy and exchange related market intelligence, DGCX said.

ABC is China's third largest lender by assets and listed on both the Shanghai Stock Exchange and Hong Kong Stock Exchange, the exchange said.

ABC first opened a branch in the DIFC in 2013. The following year, it listed a 1 billion yuan ($154 million) bond on Nasdaq Dubai, becoming the first Chinese issuer to list a bond in the wider Middle East and North Africa region, DGCX said.

Gaurang Desai, chief executive of DGCX, said: "ABC's vast customer network, increasing local presence, coupled with DGCX's expertise in the precious metals, commodities and derivatives markets provides an exciting platform to develop products and services that our shared customer base desires. We want to actively facilitate the trade flows in the precious metals and commodities between China and the Middle East."

DGCX also announced that it has signed a Memorandum of Understanding with Industrial and Commercial Bank of China Limited (ICBC). The two will work together on product development and on providing banking services to support cross-border derivatives business in the Middle East and Asia, DGCX said.

ICBC may also become a settlement bank with the clearinghouse of the DGCX. This would give ICBC access to DGCX's products and services, and eventually support clearing of RMB products, the statement said.

Another Chinese bank, the Bank of China, became a settlement bank for the exchange's clearing house last month, DGCX said.