The Rt Hon. George Osborne, Chancellor of the Exchequer, and Norman Chan, Chief Executive of the Hong Kong Monetary Authority (HKMA), today met to announce the next steps in promoting closer collaboration between London and Hong Kong as part of the increasing global use of the Chinese currency, the Renminbi (RMB). They announced the launch of a joint private-sector forum, to be facilitated by HM Treasury and the HKMA, that will enhance cooperation between the UK and Hong Kong to support the Chinese Government’s policy in the development of the offshore RMB market. The forum will focus on exploring synergies between the UK and Hong Kong, specifically looking at clearing and settlement systems, market liquidity and the development of new RMB denominated products.
As part of the agreement, the Chancellor welcomed a recent announcement by the HKMA that it will significantly extend the operating hours of its RMB payments systems to better accommodate European transactions, making it easier for RMB transactions in London to be settled.
Today’s agreement follows last summer’s landmark accord in which the UK and Chinese Governments for the first time welcomed the development of the offshore RMB market in London. The Government’s aim is for London to complement Hong Kong in becoming a major offshore RMB centre.
Speaking on his trip to the Far East, Mr Osborne said:
London and Hong Kong are uniquely placed to assist in the development of this exciting market and, further to last summer’s agreement, I am delighted that the financial services industries in both financial centres are working together to achieve this goal.
Notes for Editors
This announcement comes as the Chancellor visits Beijing, Hong Kong and Tokyo.
At the 2011 Economic and Financial Dialogue, the Chancellor and Chinese Vice-Premier Wang Qishan agreed that both sides “welcomed the private sector interest in developing the offshore RMB market in London and the growth of the market to date.”
Since this agreement, HM Treasury has been in close collaboration with the authorities in Beijing and Hong Kong to facilitate the private sector development of the RMB market in London, as part of the increasing international use of the RMB.
Deepening cooperation with Hong Kong, which is the world’s largest offshore RMB centre, is an important part of realising London’s ambitions as the leading western RMB hub, because of Hong Kong’s unique role as a gateway into the ‘onshore’ RMB market.
Reflecting the ongoing cooperation between London and Hong Kong which the Forum will develop, the HKMA has extended the operating hours of its offshore RMB payments system by five hours so it better overlaps with European markets, thereby making it easier for RMB transactions in London to be settled.
The “London-Hong Kong Forum” will be facilitated by HM Treasury and the HKMA. It will initially comprise representatives from financial institutions in both Hong Kong and London, including HSBC, Standard Chartered, Bank of China, Deutsche Bank and Barclays, and may invite representatives of other institutions as appropriate. The group will meet twice a year, once in Hong Kong and once in London. The first meeting will take place in Hong Kong in May 2012.
Since gradual liberalisation began in 2004, the size of the RMB market has increased dramatically. Total Chinese trade settled in RMB has increased from 0.7% in H1 2010 to over 9% in H1 2011; RMB deposits in Hong Kong have increased from 64 billion in January 2010 to 627 billion in November 2011; and the volume of RMB denominated bonds have increased to from zero to $31.5bn in just four years. The UK already handles almost 30% of all RMB foreign exchange trading and is home to tens of billions of RMB deposits.