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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  • Comment number 27.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this

    Comment number 25.

    Another reason why
    a-We're better off out of the Euro deal
    b-The city is incredibly important to the UK, and those calling for the heads of all bankers on a plate should reflect a little.

    Of course the city isn't perfect (what system involving human beings is?), but you soon realise the value of something by looking at how much others covet it.

  • rate this

    Comment number 184.

    179 I have NO illusions about the Chinese - but, they will do whatever they want with or without us. The City is therefore right to try to take what it can from them.

    The Chinese have out thought and out worked the West - unlike your hero Scargill who is fit only for the lunatic asylum!

  • rate this

    Comment number 159.

    156. jammydodger
    "I would suggest that your preoccupation with the "yellow peril" has more to do with 1960's comic books or maybe Readers Digest"

    Or perhaps you are just playing devils advocate alternatively are you just a patronising and condescending...person?
    Either way it would appear that you have run out of road as far as making a cogent argument for your case...Sonshine.

  • rate this

    Comment number 167.

    Well, maybe they could site some of the offices in Birmingham so the bankers can commute from London on the new high speed rail service. That will help pay for the line, as we mere mortals will never be able to afford it. But so long as we tell the EU were they can stick their Tobin Tax, let's go for it.


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