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, economics editor Article written by Robert Peston Robert Peston Economics editor

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  • rate this
    0

    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
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    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
    +1

    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
    +1

    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
    +1

    Comment number 229.

    4.hughesz
    "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.

  • rate this
    0

    Comment number 228.

    222. Comrade. yes I am. And while I'm not gifted with 20:20 foresight with regard to future bailouts, I think the UK is far ahead of, say, continental Europe with regard to preventing the need for such - vis I.C.B ringfencing, etc. Finance is a key industry for the UK, Just like carmaking is key for Germany.

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

  • rate this
    0

    Comment number 227.

    Invading countries with troops is not necessary these days.

    Economic invasion is the way forward as shown by the Chinese closely followed by the Indians. These are the new super powers in the World.

    Fantastic solution for them: they get all the econimc benefits without the lousy British weather!!

  • rate this
    0

    Comment number 226.

    223.jimbo1981

    Oceania has always been at war with Eastasia

  • rate this
    +1

    Comment number 225.

    I'll take this story with a huge pinch of salt thank you as only China really knows what it will do. The same pinch of salt that accompanies any assumptions that this will mean extra billions in tax for the treasury...well there's the increased cost of setting up new systems, bringing people in, yada yada yada...in fact the banks could probably claim a lot of their tax back to offset the expense.

  • rate this
    0

    Comment number 224.

    Soon we'll be able to completely remove anything remotely physical from any measure of the economy, and base the value of money entirely on the value of other money. What a happy day that will be.

  • rate this
    +1

    Comment number 223.

    I thought it was vital that we rebalanced the economy away from financial services? Or did I imagine that?

  • rate this
    0

    Comment number 222.

    221.The Invisible Finger

    Are you suggesting that the profit-generating/high-tax-take trends of the boom years should be extrapolated into the recession/depression?

    There's a growing consensus that the banks are teetering and will need further bailouts.

    Taking a sensible, economic view you might say the banks are now nothing more than a very heavy albatross. Lob 'em overboard now!

  • rate this
    0

    Comment number 221.

    213. Think about it. That link gives you one years tax take. It's of the same order of magnitude as the cost of that one off bailout. Over time uk plc makes a healthy return on its financial sector.
    Hardly a surprise, and totally consistent with successive uk govts wanting to keep it out of Brussels clutches.

  • rate this
    0

    Comment number 220.

    Free economies:

    http://www.heritage.org/index/

    Compare: "When institutions protect the liberty of individuals, greater prosperity results for all."

    With: "Index editors expressed concern that recent policy changes in Hong Kong, particularly implementation of a minimum wage, had “moved Hong Kong modestly in the direction of a more bureaucratic and politicized economy.” "

  • rate this
    0

    Comment number 219.

    So why we care the top executives threaten us leaving UK?

  • rate this
    0

    Comment number 218.

    217.OldPerson

    My mistake - I missed out the quoted comment's description of the quote from the article above as "curious". My applogies.

  • rate this
    0

    Comment number 217.

    #216 Little_Old_Me
    A point about comprehension. Maybe I'm just old but with the amount of political sloganising in these comments I frequently find it difficult to comprehend the substance (if any) of the point being made in the context of this blog.

    "Not so much curious as exposing Slasher Cameron's cheap electoral posturing to his party Europhobes....."

    ...is an example

  • rate this
    0

    Comment number 216.

    17.zipperty - "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 "

    Not so much curious as exposing Slasher Cameron's cheap electoral posturing to his party Europhobes.....

  • rate this
    0

    Comment number 215.

    > Talking to bankers and lawyers,

    Why keep such low company?

    > there is growing optimism that the City of London
    > will join Hong Kong as an offshore centre

    As long as a Tobin tax is applied, I'm OK with it.

  • rate this
    +1

    Comment number 214.

    #182 The GingerF
    Gordon Brown abolished Advanced Corporation Tax. It cost pension funds at least £100bn http://tinyurl.com/kpolr7

    The tories had made 2 changes before that. Lawson stopped companies using pension funds as tax-free reserves and Lamont lowered their exemption by 5%.

    Their impacts do not compare with the abolition of ACT.

 

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