♠ Posted by Emmanuel in
China,
Currencies,
Europe
at 3/26/2014 04:12:00 PM
Well, the deed is finally done: the UK is the first location outside Asia to offer clearing services denominated (demoninated?) in RMB. First there were Hong Kong and Macau (which don't really count in my book as special administrative regions of China). Then came
Taiwan and
Singapore. And now here comes a country which is not really part of the main Chinese diaspora in the
UK:
Britain and China will sign an
agreement next week to set up the first clearing service for
renminbi trading outside Asia, putting London in a prime
position to offer yuan trade business in Europe. China has been a key focus of finance minister George
Osborne's efforts to boost exports of financial services from
Britain, which was the first Group of Seven country to agree a
renminbi swap line with the People's Bank of China last year.
Britain's finance ministry said on Wednesday that the Bank
of England and PBOC would sign an agreement on renminbi clearing
and settlement next Monday, setting out how the two central
banks will cooperate on setting up a clearing bank.
The UK government has been lobbying hard for this result--to be able to settle yuan transactions between counterparties in RMB without changing into USD as per conventional practice--for some time now. The obvious advantage is in consolidating London's place as Europe's or indeed even the world's financial center as China and its currency internationalize further during coming years:
The deal aims to strengthen London's position, allowing it
to attract higher volumes by making it the venue of choice for
settling transactions outside the Asian timezone. "Connecting Britain to the fastest growing parts of the
world is central to our economic plan," said Osborne in a
statement.
"Other Western countries will follow, but London now has the
critical mass of infrastructure, helping to put Britain at the
front of the global race." [...] Britain's finance ministry said 62 per cent of yuan payments
outside of China take place in London, citing data from the
SWIFT global financial transactions network.
In the same way that Germany doesn't bash Russia over the head with democracy and human rights mumbo-jumbo, the UK doesn't do the same with China given how Britain stands to benefit from China's emergence with London consolidating its position as a financial center. Is it really any surprise the Chinese chose London ahead of, say, New York? The burghers of Beijing ain't stupid--or immune to charm offensives.
