City ‘to be offshore currency market for China’

Canary Wharf

Talking to bankers and lawyers, there is growing optimism that the City of London will join Hong Kong as an offshore centre where the Chinese currency, the Renminbi, can be traded - and that an announcement on all this may not be far off.

If that were to happen, it would be quite a big deal - and would be the culmination of talks between the British Treasury and the Chinese authorities that are said to have made significant progress on this issue last autumn.

What may matter most, in a global context, is that this would be seen as a further step on the road to towards relaxation of China's strict controls of the value of its currency and on flows of capital. The RMB would be on its way to becoming a proper globally traded currency, commensurate with China's status as the world's second biggest economy.

But for the UK, there would be a boost both to business and jobs in the City and to the prestige and reputation of London as a global financial centre.

That would be some comfort to international bankers based in London, many of whom were alarmed that the UK's position in the single market - which they say is the main reason they work in the City - could be put at risk by David Cameron's recent decision to veto amendments to the European Union's treaty, which forced eurozone governments to conclude a new separate agreement in their efforts to save the single currency.

They believe an agreement between the Treasury and the Chinese authorities, that would see the City as an RMB offshore trading centre for the western time zone, could only be reached if the Treasury had persuaded China that the UK's commitment to the European single market, and its influence over it, had not been significantly weakened.

However, in a way it would be extraordinary if the City failed to win the new RMB trade, because it is on many measures the pre-eminent global financial sector, and there are powerful political reasons why the Chinese would be reluctant to give the putative privilege to Wall Street, the City's closest rival.

One City figure close to the talks told me he thought there would be a billion pounds of extra business and significant new jobs created almost overnight.

A senior banker told me his global firm would create a whole new team in London to trade the Chinese currency. "This would be very big for us", he said.

Lawyers would benefit too, said sources, by creating new RMB contracts that would be subject to English law.

Robert Peston Article written by Robert Peston Robert Peston Economics editor

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  • rate this

    Comment number 233.

    Its about time we totally abandon the waste of time that is the euro and move on and look after the interests of the UK, lets hope this is the start of us turning our backs on the failed socialist experiment that is the euro and the EU.

  • rate this

    Comment number 232.

    This issue has all the usual buzz words and expectations, the key word is offshore, benefiting players which include external investors, City operators and UK tycoons who can afford to arrange their affairs offshore as well.
    I can see a lot of winners on this financial service deal, but somehow not for 95% of UK taxpayers.....roll-on with the boom and bust show....

  • rate this

    Comment number 231.

    230. no profits indeed means no taxes. UI have no problem expecting future earnings to tax though (clearly we dont agree there...)
    That aside:
    Employing folks certainly=employer NI.
    Paying them = income taxes and employee NI.
    Their spending any of that money means VAT.

    And of I still maintain that credit provision, transaction processes etc are vital and best done by the private sector.

  • rate this

    Comment number 230.

    228.The Invisible Finger

    No profits menas reduced taxes. Extrapolating is unreasonable. There is value but it is reduced and risk is increasing.

    "I think people's hatred of bankers blinds them to the importance of banking."

    Not the other way around perhaps? ...That people's awareness of it's importance sends them into a blind rage at such epic-scale failures.

  • rate this

    Comment number 229.

    "The sums are worth billions in taxes and providing good regulation is provided"

    I'll just stop you there. Good regulation? You may as well hope the government provides dodos.


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