UK, China to sign his­toric cur­rency clear­ing deal

Com­pe­ti­tion fierce to be first non-Asian yuan set­tle­ment ser­vice

China Daily (Canada) - - BUSINESS - By CE­CILY LIU in Lon­don ce­cily.liu@chi­

Bri­tain and China will sign an agree­ment on Mon­day to work on set­ting up the first clear­ing and set­tle­ment ser­vice for ren­minbi trad­ing out­side Asia, Bri­tain’s Trea­sury said onWed­nes­day in a state­ment.

Fi­nan­cial sec­tor ex­perts in Lon­don have wel­comed the news, hail­ing it as a mile­stone in boost­ing Lon­don’s ad­van­tage in the con­test to be­come the Western hub for off­shore ren­minbi trans­ac­tions.

“This is a pos­i­tive step and is fur­ther ev­i­dence of the strong links be­tween the UK and Chi­nese cen­tral banks and the pub­lic sec­tor,” said Spencer Lake, global head of cap­i­tal fi­nanc­ing at HSBC.

Lake said hav­ing an of­fi­cial clear­ing bank will help Lon­don’s fi­nan­cial mar­ket to build up ren­minbi trans­ac­tion vol­umes, which will help with the in­ter­na­tion­al­iza­tion of the Chi­nese cur­rency.

“We ex­pect the cur­rency to be fully con­vert­ible in the next two to three years un­der the cap­i­tal ac­coun­tand­sub­ject to the suc­cess of China’s over­all re­form plans,” Lake said.

An of­fi­cial clear­ing ser­vice fa­cil­i­tates the ef­fi­cient clear­ing of off­shore ren­minbi trans­ac­tions, achieved through di­rect co­op­er­a­tion be­tween a commercial bank in Lon­don ap­pointed for this pur­pose and the People’s Bank of China.

Hav­ing an of­fi­cial clear­ing bank also al­lows more liq­uid­ity for the off­shore ren­minbi cen­ter that hosts the bank. More­over, it bears sym­bolic sig­nif­i­cance for the off­shore ren­minbi cen­ter in that it has recog­ni­tion from the Chi­nese govern­ment.

The an­nounce­ment came amid fierce com­pe­ti­tion be­tween dif­fer­ent Euro­pean fi­nan­cial cen­ters, in­clud­ing Paris, Frankfurt and Lux­em­bourg, to be­come the top des­ti­na­tion for off­shore ren­minbi trans­ac­tions.

For ex­am­ple, Lux­em­bourg Min­is­ter of Fi­nance Pierre Gramegna said in Fe­bru­ary the amount of trade fi­nance trans­ac­tions us­ing ren­minbi in Lon­don in the first half of

2013, up from13.8 bil­lion a year ear­lier that he will put for­ward the re­quest for Lux­em­bourg to have an of­fi­cial clear­ing bank when he vis­its China in June.

Bri­tish Chan­cel­lor of the Ex­che­quer Ge­orge Os­borne said the an­nounce­ment is a ma­jor step for­ward for Lon­don to in­crease ren­minbi ac­tiv­ity and is a re­sult of hard work by the UK’s pub­lic sec­tor to drive for­ward this agenda.

“I’ve put­much­gov­ern­ment ef­fort over the last three years into mak­ing sure we’re the leading Western cen­ter for trad­ing in the Chi­nese cur­rency, the ren­minbi. That ef­fort has paid off,” Os­borne said.

Os­borne said Lon­don’s ren­minbi trans­ac­tion growth will lead to growth in jobs and in­vest­ment in the fu­ture.

“Of course, other Western coun­tries will fol­low, butLon­don­nowhas the crit­i­cal­mass of in­fra­struc­ture, help­ing to put Bri­tain at the front of the global race,” he said.

Mark Boleat, pol­icy chair­man for the City of Lon­don Corp, also wel­comed the ini­tia­tive, adding that it will help to re­in­force con­fi­dence in Lon­don for ren­minbi ac­tiv­i­ties.

“It should en­cour­age more UK firms to use the ren­minbi as a cur­rency for in­ter­na­tional trade,” he said.

Bri­tain’s Prime Min­is­ter David Cameron and China’s Pres­i­dent Xi Jin­ping had dis­cussed co­op­er­a­tion be­tween the two coun­tries over ap­point­ing a clear­ing and set­tle­ment bank dur­ing a meet­ing on the mar­gins of a nu­clear se­cu­rity sum­mit in the Nether­lands on Tues­day, Wed­nes­day’s state­ment said.

Sta­tis­tics re­leased by the City of Lon­don in Jan­uary showed that trade fi­nance trans­ac­tions us­ing ren­minbi in Lon­don to­taled 27.94 bil­lion yuan ($4.61 bil­lion) in the first half of 2013, up from 13.8 bil­lion yuan a year ear­lier.

Mean­while, daily aver­age trad­ing vol­ume of ren­minbi-re­lated for­eign ex­change prod­ucts in Lon­don ex­panded to $22.3 bil­lion, up from $11.6 bil­lion.

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