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Money talks and London listens to the yuan

By Diao Ying  (China Daily)

08:23, June 19, 2012

Li Min/China Daily

The fashionable youths in hot pants flocking to high-end department stores in London and bankers in dark suits walking in and out of skyscrapers in the financial district have one thing in common, a growing interest in the Chinese currency.

During the recent holiday to celebrate the Diamond Jubilee of Queen Elizabeth II, Harrods, a department store known for its ties with the British royal family, launched its own Sina Weibo, a popular Chinese social media platform, to attract more Chinese customers. Shoppers can find "the very latest, limited edition and exclusive products", with Hermes, Chanel and Louis Vuitton among the most popular brands, according to the store's spokesman.

More than 100 UnionPay payment terminals in the store also help to make Chinese shoppers feel more at home. Through the machines, part of China's unified bank card network, Chinese visitors can pay for their purchases with the same cards they use at home.

A few streets from Harrods, a billboard featuring a green jade dragon shaped like the yuan symbol stands outside a bank. The ad reads: "A new global currency is emerging. Be part of it." The commercial is for HSBC, a bank rooted in the silk and tea trade between China and Britain in the 19th century.

The UnionPay terminals, the jade dragon advertisements and the shops on the streets of London offering exchange services between the British pound and the yuan are the tip of the iceberg in the biggest story in the financial markets today: the internationalization of the Chinese currency.

As people search for a bright spot amid sluggish economic growth in the West, beset as it is by the European debt crisis, companies, investors and financial institutions are increasingly focused on the yuan. From Beijing to Hong Kong, Tokyo to London, policymakers and businesses are part of the push.

There are several forces driving this move, both at home and abroad. The People's Bank of China has made several moves this year to liberalize the exchange rate; George Osborne, the UK chancellor of the exchequer, took the initiative to develop London into an offshore trading center for the yuan earlier this year; and this month, the yuan became convertible with the Japanese yen under an agreement between the Chinese and Japanese governments.

"All of it demonstrates that the Chinese government is pushing forward the internationalization of the yuan and encouraging the use of yuan offshore. That will help the global economy in many ways," said Adam Tyrrell, head of European capital markets for Standard Chartered in London.

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