Chancellor hosts Premier Li Keqiang at first Financial Forum between the two countries.
The Chancellor of the Exchequer has today (Wednesday 18 June) announced a significant next step in the UK becoming the offshore centre for the Chinese currency and investment, as he hosted Premier Li Keqiang and other senior policy makers from Britain and China at the first Financial Forum to be held between the two countries.
First announced by the Chancellor during his visit to Hong Kong earlier this year, the Forum is dedicated to discussing the opportunities that China’s increasing economic and financial importance presents to both countries to generate jobs and growth, in particular through the internationalisation of China’s currency, the renminbi (RMB).
The Financial Forum saw the announcement of a series of measures designed to deepen economic and financial co-operation between Britain and China including:
- direct trading between the British and Chinese currencies for the first time. This is an important step in strengthening economic and financial ties between the UK and China by facilitating the formation of a bilateral exchange rate, lowering transaction costs and promoting the use of RMB and sterling in bilateral trade and investment
- granting further licences to British firms to enable them to invest directly into Chinese markets. Blackrock and HSBC Global have been granted RMB Qualified Foreign Institutional Investors (RQFII) status by the China Securities Regulatory Commission (CSRC), which builds on the agreement by the Chancellor and Vice Premier Ma Kai at the UK-China Economic and Financial Dialogue in October 2013, where the UK secured a RMB 80bn RQFII quota
- approving Renminbi dominated loan guarantees by the government’s export credit agency, UK Export Finance (UKEF), which could lead to the first Renminbi transaction supported by UKEF. This will help to support British exporters compete for and win new business in China
The Chancellor also welcomed the announcement earlier in the day that China Construction Bank (CCB) has been appointed as the first official RMB clearing bank outside Asia, in London. This is an important step which reinforces Britain’s position as the western hub for Chinese finance.
From almost no offshore RMB activity in London in 2011, by the end of 2013 SWIFT data showed that London accounted for almost two-thirds of RMB trading outside of Mainland China and Hong Kong.
The latest data also shows that London accounts for 57% of all RMB-denominated SWIFT payments between Europe and Mainland China and Hong Kong. And Standard Chartered’s RMB Globalisation Index, which puts London as the most important offshore RMB centre after Hong Kong, concludes that payments through London are now comparable to levels seen earlier last year in Hong Kong.
The UK-China Financial Forum was attended by senior British and Chinese decision and policy makers including the Chancellor, Premier Li, Governor Zhou of the People’s Bank of China, Sir Charlie Bean, Deputy Governor of the Bank of England, and the Chairmen and Chief Executives of Britain and China’s largest global banks.
The Chancellor said:
Let me be clear. Our long term economic plan is working, but the job isn’t done. We need to export to fast growing economies like China, and attract more investment to our shores.
To do that we need to make sure China’s currency, as it emerges onto the world stage, is used and traded here – as that will not only be good for China, but good for UK jobs and investment too.