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Economy

London maintains world's leading offshore RMB centre

November 14, 2019


Abstract : Record amounts of RMB are now being traded daily in London, according to the 5th edition of the London RMB Business Quarterly published Monday. The city of London views it as another vote of confidence for the top international financial centre.

LONDON, Nov. 14 (Xinhua) -- Record amounts of RMB are now being traded daily in London, according to the 5th edition of the London RMB Business Quarterly published Monday. The city of London views it as another vote of confidence for the top international financial centre.

The capital city of the UK has retained its position as the leading offshore RMB trading hub outside of Asia, despite the disruption and uncertainty brought by the long-journey of the country's departure from the European Union (EU).

Record-high volumes

The latest edition of the report reveals that, in the second quarter of 2019, an average of 85 billion British pounds (109 billion U.S. dollars) worth of RMB were traded on a daily basis in London, up 8.8 percent quarter to quarter, and 22.9 percent higher year on year.

Launched by the City of London Corporation and People's Bank of China Representative Office for Europe in 2018, the report serves to contribute to the understanding of the London offshore RMB market, providing most recent data, policies and commentaries from market participants.

The report also said, between June and August, the average daily clearing volume by the UK designed RMB clearing bank, China Construction Bank (CCB) London Branch, hit 43.97 billion RMB, up 18.4 percent from the last report.

According to CCB, till now, the total RMB clearing volume of its London branch has exceeded 40 trillion yuan, with an average daily clearing volume of 50 billion yuan.

"Financial industry is one of the most vigorous and promising sector in China-UK cooperation," said Chinese Ambassador to Britain Liu Xiaoming on a recent celebration event of the fifth anniversary of CCB London's launch of RMB clearing services.

"CCB's RMB clearing services has also made London an important platform for RMB offshore transaction between China and other countries," said Liu.

New opportunities

"In addition to the record-high average daily trading volume, another highlight of this edition of the report is to explore RMB bonds as eligible collateral accepted by the UK market, which is an important policy outcome of the 10th UK-China Economic and Financial Dialogue (EFD), " said Jin Mei, Chief Representative of the People's Bank of China's Representative Office for Europe.

This development may help relieve the shortage of high-quality liquid assets (HQLA) in the UK market, strengthen the status of London as an offshore RMB hub, and facilitate the opening up of China's bond market as well as the internationalization of the RMB, according to the report.

In the past 40 plus years since the beginning of reform and opening up, China has been committed to opening its market and pursuing win-win cooperation at a higher level. As China's financial sector continuously delivers benefits to the world, countries like the UK see more and more opportunities.

"During the 10th UK-China EFD, we saw both sides recognize the unrivaled depth and liquidity of London's market and agreed to further support internationalization of the RMB, through enhancing cooperation on capital market connection, financial market infrastructure and regulation, and cross-border use of RMB," said Charles Bowman, the 690th Lord Mayor of London.

"These agreements will really help to bring the RMB initiative to the next and to the new level." he added.

Another key project of cooperation launched in June during the 10th UK-China EFD is London-Shanghai Stock Connect which provides a direct channel for equity trading between the two countries.

"Linking one of the world's largest capital markets with one of the world's most international financial centers is good news for Britain, China and the wider global economy. It will allow global investors to benefit from China's growth through London, while Britain-listed companies will be able to access Chinese investors directly," said Catherine McGuinness, policy chair at the City of London Corporation.

Retaining the crown

London has been replaced by New York in the top of a financial centre ranking and slipped further behind this year, facing considerable uncertainty kicked off by the EU referendum more than three years ago.

Some companies have announced a transfer of assets from London, and thousands of jobs have been relocated from the British capital to other European cities.

However, London retains the crown of the world's largest RMB offshore trading hub outside of Asia. McGuinness looked forward to seeing this trend continue long into the future, and believed the fundamentals of London and the UK would continue to shine brightly.

"It's no secret that the UK has long been a world-leader in foreign exchange...Naturally we've also grown to become the leading hub for RMB trading, with levels of the Chinese currency going through London far outstripping that of any other financial centre," she said.

London is now home to over 30 Chinese financial and professional services firms which joined the London market to build their international presence. The RMB is an important global currency and it is natural, as home to the world's largest foreign exchange market, that London monitors its use and innovations closely.

"London's success as that leading offshore center for RMB depends on many factors, including our competitiveness and our capacity for innovation. But it also depends on our relationships with key partners such as CCB," said Bowman.

About 74 financial institutions, including HSBC, Standard Chartered, Barclays, J.P. Morgan, Citibank, Chicago Mercantile Exchange and Banco Central do Brasil, have opened accounts with CCB London.

The UK has rich experience in consumer finance, digital banking and big data analysis. China has a huge market involving advanced mobile payment and inclusive finance. Cooperation between the two countries such as FinTech innovation would give a strong boost to the overall China-UK financial cooperation, Liu suggested.   (Contributed by Yang Xiaojing, edited by Yang Yifan, yangyifan@xinhua.org)

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