China offers Switzerland $8b QFII quota

DAVOS - China has agreed to give Switzerland an $8 billion investment quota under its Qualified Foreign Institutional Investor (QFII) program.

The agreement is part of a memorandum of understanding signed by the central banks of the two countries here on Wednesday, which also includes a plan - pending regulators' approval - to set up the first branch of a Chinese bank in the Swiss financial hub of Zurich for future renminbi clearance.

The deal is set to materialize Beijing and Bern's pledge for closer financial ties and accelerate the establishment of a Zurich offshore renminbi market, which will mark a crucial step in the internationalization of the renminbi, especially in Europe.

The signing came after visiting Chinese Premier Li Keqiang met in this ski resort with President Simonetta Sommaruga of the Swiss Confederation on the sidelines of the 2015 annual meeting of the World Economic Forum (WEF).

As the renminbi , also known as yuan, is rapidly gaining traction in international transactions, China has established offshore renminbi markets in Hong Kong and London, among other places.

In July last year, Chinese and Swiss central banks signed a bilateral currency swap agreement worth 150 billion yuan ($24 billion) in a bid to provide liquidity support for bilateral trade and economic cooperation.

Li is attending the WEF meeting in Davos and paying a working visit to Switzerland, his second trip to the Alpine country since he took office in 2013.

This year marks the 65th anniversary of the establishment of diplomatic ties between China and Switzerland.

The Chinese foreign ministry said earlier that Li's visit is in part aimed at reaping the "dividend" of the free trade agreement between the two countries, which took effect in July 2014.

Switzerland, famous for its precision instruments and pharmaceuticals, was the first among the world's top 20 economies to reach a free trade deal with China.