China Sets Stage With New Yuan-Clearing Process

From Wall Street Journal:

As the U.S. and European Union move toward having central counterparties clear over-the-counter derivative products, China is making similar changes to its foreign-exchange spot market, a move that could lead to the development of more-complex financial markets.

China has been slow to develop derivatives markets, partly because of its experience with bond futures in the mid-1990s, when the market nearly collapsed as one player maneuvered to salvage a losing position.

Beijing’s subsequent wariness of any type of speculation has left financial derivatives, key tools for companies trying to manage their foreign-exchange and credit risks, limited in scope and liquidity.

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