London aims to be the centre of yuan trading

THREE years ago, Chinese officials said UK Prime Minister David Cameron had “seriously damaged” relations by meeting with the Dalai Lama, the exiled Tibetan leader. As planned talks between the two countries were cancelled or failed to take place, worries emerged that Britain would miss out on building deeper economic ties.

That doesn’t seem to be a problem anymore. As the UK capital hosted Chinese President Xi Jinping this week, a ranking People’s Bank of China official told a British executive that the central bank already expected London to be the worldwide centre for yuan renminbi trading. The London executive asked not to be named, citing confidentiality.

UK executives care about relations with China, because its economy is widely expected to regain its 19th century role as the world’s largest. And while its currency wasn’t even allowed outside its own borders before 2004, China is opening up now, spurring predictions that the yuan will become a reserve currency, eventually rivalling the dollar.

London already has 40 percent of global foreign exchange trading and wants to build on its dominant position by grabbing a major share of offshore yuan trading.

“We’re seeing the internationalisation of the (yuan) renminbi growing at a pretty brisk pace here,” Standard Chartered Europe chief executive Richard Holmes said. “There’s a lot of runway. There’s a lot further to go. And that’s due to what I view as the end of US dominance.”

London’s prowess in foreign exchange trading has been a frequent theme in the past week as bankers and politicians cite a statistic from TheCityUK, a financial services lobby group: London trades more dollars than New York, and more euros than all of Europe combined.

For the UK capital, increasing its yuan trading could mean more financial services jobs and more investment. – Bloomberg