UK Grins As London's Role As Offshore RMB Trading Hub Grows

Tom Burroughes

19 June 2014

The UK government yesterday announced measures to boost financial market dealings with China, reflecting the rising clout of the renminbi currency. The moves coincide with the announcement that has been appointed as the first official RMB clearing bank outside Asia, in London.

While the linkages between London and Chinese markets have been controversial – the purchase of prime luxury properties by Chinese investors has raised concerns about skyrocketing prices and lack of affordable housing – the latest moves also suggest linkages are growing.

UK finance minister George Osborne hailed “a significant next step in the UK becoming the offshore centre for the Chinese currency and investment”. He hosted Chinese Premier Li Keqiang and other senior policymakers from Britain and China at the first Financial Forum to be held between the two countries. The creation of the Forum was first announced by Osborne during a trip to Hong Kong earlier this year.

The Forum discusses opportunities that China’s increasing economic and financial importance presents to both countries.

Anglo-China measures include direct trading between the British and Chinese currencies for the first time; granting further licences to British firms to enable them to invest directly into Chinese markets. (Blackrock and HSBC Global have been granted RMB Qualified Foreign Institutional Investors (RQFII) status by the China Securities Regulatory Commission.) In October last year, the UK secured a RMB80 billion RQFII quota. Another measure has been approval of renminbi-dominated loan guarantees by the government’s export credit agency, UK Export Finance.

The rise in offshore RMB activity through London has been rapid, the UK government said in its statement. “From almost no offshore RMB activity in London in 2011, by the end of 2013 SWIFT data showed that London accounted for almost two-thirds of RMB trading outside of Mainland China and Hong Kong,” it said.

“The latest data also shows that London accounts for 57 per cent of all RMB-denominated SWIFT payments between Europe and Mainland China and Hong Kong,” it added.