London set to become hub for Chinese currency trading
The UK and Hong Kong are planning to turn the City into an offshore trading centre for the world’s fastest-growing currency, the Chinese renminbi, of which the Yuan is the main denomination.
At the Asian Financial Forum in Hong Kong, Chancellor George Osborne said that talks in Beijing this week will further the "establishing of London as a new hub for the renminbi market as a complement to Hong Kong."
It’s his view that the talks reflect China’s opinion that London is the west’s major financial centre and gateway to the European single market, while China is Asia’s ‘engine for world growth.’
The chancellor will agree measures with the chief executive of the Hong Kong Monetary Authority, Norman Chan, to help the city of London play a pivotal role in increasing the renminbi’s global status.
They are setting up a forum investigating alliances between the UK and Hong Kong - the world’s biggest offshore centre for the Chinese currency - including renminbi products and clearing and settlement systems.
HSBC bank is one of the country’s leading proponents of the renminbi, and chief executive, Stuart Gulliver, said: “Successful co-operation will support British businesses as they look east to the opportunities in Asia while supporting Asian businesses looking west to Britain as a natural home for trade and investment.”
The deal is seen as a repost to European Union regulations to limit the power of the City and Osborne sees the City as being just as important to the whole of the EU as it is to the UK.
Hong Kong plans to extend the operating hours of its payments system for the renminbi by five hours to improve offshore trading with London, allowing financial institutions in London more time to settle offshore renminbi payments.
A Treasury official said: “The UK is the only European country to hold a dialogue at such a senior level with the Chinese government, and last summer’s discussions followed on from an increase in UK goods exports to China in 2010 by 40% to £7.6bn.”
Total Chinese trade settled in renminbi increased from 0.7% in the first half of 2010 to more than 9% in the first half of 2011. Renminbi deposits in Hong Kong have increased from CNY 64bn in January 2010 to CNY 627bn in November 2011.
Bank of China said it “strongly supports” London to be the next offshore renminbi trading centre, after Hong Kong, while Peter Sands, Standard Chartered’s chief executive, said London had “a unique opportunity” that should not be missed.