As part of a series of measures designed to deepen economic and financial co-operation between Britain and China announced today, direct transactions between the British and Chinese currencies will become available in both Chinese and British foreign exchange markets.
With the agreement of the People’s Bank of China’s there will be direct trading between the Chinese Renminbi (RMB) and Sterling, rather than through the US dollar. Trading will start straight away on the China Foreign Exchange Trade System (CFETS), facilitating the formation of a bilateral exchange rate which will lower transaction costs for UK and Chinese companies.
The decision will promote the use of Renminbi and Sterling in trade and investment and strengthen economic and financial ties between the UK and China. This is an important step to promote the bilateral economic and trade relationship between China and the UK.
The news comes as the City of London Corporation’s Renminbi Business Volumes Report found that trading in London’s offshore market in deliverable Renminbi products increased by over 140% in 2013, to reach an average daily value of $18.7bn. For the first time these products overtook non-deliverable products like derivatives, demonstrating growing liquidity in London’s Renminbi markets. Today London accounts for approximately had 62% of Renminbi trading outside Mainland China and Hong Kong.
The China Foreign Exchange Trading System (CFETS) CFETS is a sub-institution of the People’s Bank of China. It provides China with a central market for foreign exchange trading, quoting a daily price for various currency pairs. Today CFETS announced that they will launch direct RMB/GBP trading.