THE London Metal Exchange is looking at the feasibility of clearing products in yuan, according to Hong Kong Exchanges & Clearing Ltd, owner of the world's largest metals bourse.

The company will also study the potential development of yuan-denominated commodity products for HKEx platforms, Chief Executive Officer Charles Li said in a statement yesterday as it signed a memorandum of understanding with the Bank of China. The bank clears the currency for Hong Kong, Macau and Taiwan and its investment-banking unit became an LME clearing member last year.

The HKEx's push signifies a further effort to promote the currency of the world's second-largest economy as a global one, and comes a month after China pledged to propose plans this year for capital-account convertability.

Li was the architect of the US$2.2 billion purchase of the LME, which he plans to use to make inroads into the Chinese mainland, the largest consumer of everything from base metals to soybeans.

The agreement with BOC and the LME "marks the beginning of our collaboration to examine the feasibility of LME contracts to be cleared" in yuan and potential development of yuan-denominated commodity products, Li said. The accord, which came on the first day of LME Week Asia in Hong Kong, covers cooperation and information exchange, according to the statement.

HKEx, the second-largest bourse operator, said last week that it plans to list yuan-denominated commodity contracts including iron ore, coal and farm products. The initial products would be cash-settled, according to a spokesman, as opposed to those on the LME, where users settle via physical delivery.

Li said in October that HKEx wanted to bring more volume to the LME, and may help the exchange to reduce trading curbs in China and also establish registered warehouses on the mainland.