The U.K. has made a deal with China to appoint a RMB clearing bank in London, aiming to attract more Chinese investments and create more jobs.
The People’s Bank of China (PBOC) and the Bank of England will sign an agreement on RMB clearing and settlement in London on March 31, 2014.
The decision further strengthens London’s position as the Western hub for Chinese currency dealing. According to SWIFT data, 62 percent of RMB payments outside China take place in London, and London asset managers are the only ones in the West able to invest directly in Chinese stocks and shares in RMB.
RMB bond is popular in London’s markets.
The highly sought-after RMB bond issued by the International Finance Corporation (IFC) in London earlier this month was the first benchmark bond by an international financial institution, which demonstrated the interest from international investors in London’s RMB markets.
The UK was the first G7 country to agree a RMB swap line with the PBOC, and the agreement on clearing and settlement arrangements, the first outside Asia, is the logical next step to giving the international market in London the confidence to expand their RMB activities. A London clearing bank would complement the main clearing and settlement infrastructure in Hong Kong by supporting efficient transfer of funds within the Western time zone.
London’s RMB agreement is the major step
Chancellor of the Exchequer George Osborne said: “Connecting Britain to the fastest growing parts of the world is central to our economic plan. It's why I've put such government effort over the last three years into making sure we're the leading western centre for trading in the Chinese currency, the RMB. That effort has paid off - and today's agreement, the first outside Asia on clearing and settlement arrangements, is another major step forward. It is great news and I look forward to the appointment of a clearing bank soon.
“Of course, 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. This means jobs and investment in the future.”