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.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.
"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.