London is to host the first official clearing service for the renminbi outside Asia after an agreement was signed between the UK and Chinese central banks on 31 March.
This development will cement London’s status as the Western hub for renminbi financing and trade. The assigned clearing bank – which is likely to be a large Chinese bank – will be able to help other banks in the City to access the existing renminbi onshore clearing system – the China National Advanced Payment System.
At present, the UK capital relies on Hong Kong for renminbi liquidity and clearing services. But having a clearing bank in London will help to further develop renminbi-related trading and bond issuance activities in the City. It will also help other European financial centres, such as Luxembourg, Paris, Frankfurt and Switzerland, to develop their own renminbi business.
Commenting on the agreement, Mark Boleat, policy chairman for the City of London Corporation, said: “The agreement between the Bank of England and the People’s Bank of China will help to reinforce confidence in London and underlines the close partnership between the British and Chinese authorities. It should encourage more UK firms to use the renminbi as a currency for international trade.”
London is the world's biggest FX and bond trading centre.
Sally Percy is editor of The Treasurer