George Osborne: Deal For London To Become Hub For Chinese Yuan 'Worth Billions'

Huffington Post UK    
First Posted: 16/01/12 11:18 Updated: 16/01/12 12:07

Plans for London to become the international trading centre for China's currency have been announced on a visit to Hong Kong by Chancellor George Osborne.

The treasury said that the plans could bring billions of revenue into the City.

Speaking at the start of a three-day trip to Asia, Osborne said that the Chinese yuan, also known as the renminbi, was increasingly looking to trade beyond China's borders and that London was perfectly suited to meet that demand.

"There is a very specific opportunity for Britain as China grows as an economy," Osborne told the BBC's Today programme.

"I've concluded an agreement with the Chinese, and with the Hong Kong authorities as well, for London to develop as the financial centre for the Chinese currency as it becomes more internationally used."

China has recently relaxed controls on the value of its currency as its economy continues to open up to international markets. A report by Chatham House recently argued that its importance would grow dramatically once trading hubs are established.

An initial agrement for London to work with Hong Kong to trade the yuan internationally was reached over the summer.

In statements released on Monday the UK treasury and the Hong Kong Monetary Authority said they will help to create a forum for banks to cooperate on trading the currency.

In a speech in Hong Kong, his first of 2012, Osborne said the UK also wanted to expand business and trade with Asia.

"We in Britain can build on our position as the home of Asian investment and Asian finance in Europe - provided we're bold enough to do what it takes to make that happen, and we will," he told the Asian Financial Forum.

"Even more than it already is, we want Britain to become one of the easiest places to invest, to raise capital, to start a business, to expand and to export from."

Stephen Gallo, head of market analysis at Schneider Foreign Exchange, told the Huffington Post UK that it was "inevitable" that London would become a major offshore trading hub for the currency, but said he doubted that it would happen before another hub was established in Asia.

"The only question then is the timing," he said. "Will London be the next one to come on line, or will that centre be in Asia?

"I always thought it would be another in Asia that comes next and the pace of the discussions taking place now between the UK and Hong Kong haven't changed that view.

"The more centres outside of Asia that China allows to be offshore hubs, the more difficult it will be for the central bank to manage the value of the yuan, which is counterproductive in a closely managed currency regime such as the one China currently uses."

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