The UK Chancellor George Osborne landed in Hong Kong on 16 January 2012 as part of a trade mission to Asia and proclaimed that London was “uniquely placed” to assist the development of the renminbi (RMB) as a true international, world currency.
Citing an intergovernmental agreement from last summer whereby London and Hong Kong agreed to work together on developing trading in yuan (or RMB as it is also known externally), Osborne said that he wanted to establish London as the new hub for the fast growing market, complementing Hong Kong and China’s existing position as the ‘home’ markets.
According to the Chancellor, the UK capital “is perfectly placed to act as a gateway for Asian banking and investment in Europe.” London’s large, well established foreign exchange (FX) markets would benefit considerably from the agreement, which could potentially inject billions of dollars into the City’s coffers, especially as the power of the US dollar around the globe wanes.
China has been gradually relaxing its strict controls on the value of its currency and on the capital flows surrounding it to better reflect the country’s status as the second largest economy in the world. It is predicted that trade transactions settled in the Chinese currency will reach around a trillion US dollars by the end of the decade.
Commenting on the initiative, David Sear, global managing director of Travelex Global Business Payments, said that “the UK Treasury’s move to make London the leading international hub for trading China’s currency was a ground-breaking decision in the history of the internationalisation of the RMB”.
“This is good news for the UK,” he added. “The ability to trade in the RMB will not only help UK-based SMEs [small and medium-sized enterprises] to capitalise on the world’s second largest economy, but it is also a step in the right direction in terms of boosting an export-led recovery.” London will also consolidate its position as the global centre for trading in the world’s currencies, taking advantage of its central location as a nexus between east and west.
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