Speech by the Chancellor of the Exchequer, Rt Hon George Osborne MP, at the City of London RMB launch event
This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government
Speech by the Chancellor of the Exchequer.
I am delighted to be here today to celebrate London as a centre for international Renminbi (RMB) business.
This is a significant moment.
This morning, we saw the launch of the first RMB bond outside of Chinese sovereign territories.
And it happened here in London.
This builds on the progress London has already made toward becoming the western hub for RMB.
By the end of last year, the volume of RMB deposits in London had already reached 109bn RMB - equivalent to around 11bn pounds, of which 35bn RMB - around 3.5bn pounds - are customer deposits.
The annual trading volume in offshore RMB bonds had reached 28 billion RMB - around 3 billion pounds.
And London already represents 26% of the global offshore RMB spot forex market - the majority is based in Hong Kong.
This is a market which grew by over 80% last year.
Let me be clear - London is not in competition with Hong Kong, it is a complement - providing a Western hub for RMB business.
These developments are the culmination of a team effort by global banks with operations in London and Hong Kong, strongly supported by the UK, mainland Chinese and Hong Kong Authorities.
A year ago, when Vice Premier Wang Qishan met with me and my team here in London for the Economic and Financial Dialogue, the British and Chinese Governments set out a joint communique welcoming private sector interest in developing the offshore RMB market in London.
The Hong Kong Authorities’ announced at the end of the year their intention to extend the operating hours of the Hong Kong RMB payments system, making it easier for RMB transactions to be settled in London.
I want to commend the Hong Kong authorities on their pioneering work in developing the international RMB market.
In January, at the Asia Financial Forum, Norman Chan, the Chief Executive of the Hong Kong Monetary Authority, and I announced the launch of the London-Hong Kong private-sector forum, to be facilitated by HM Treasury and the Hong Kong Monetary Authority.
The growth of its exciting new RMB business is a natural development for this great city of London.
London has a long history of global financial inventiveness - from founding the first organised market for insurance for trading around the world hundreds of years ago, to the development of the Eurodollar markets through the 1960s, 70s and 80s, and global foreign equities trading in more recent times.
RMB trading is the next step along a 400 year road.
And it is natural that when Chinese banks look westwards, they choose London as the hub for RMB in the West, given London’s pre-eminence as a financial centre, and its expertise in areas such as foreign exchange and bond issuance.
It’s an important reminder to us in the UK that - while, of course, there are vital questions we need to answer about how we protect taxpayers from banks that are too big to fail, and that we need to ensure the British economy has other strings to its bow as well as financial services - we should have the confidence to look not only at the problems, but also celebrate our successes.
London is the world’s pre-eminent financial centre, and it’s actually becoming more successful.
Only last month, London retained its position at top of the Global Financial Centres competitiveness Index.
In fact, we were the only one of the top five financial centres which had increased its competitiveness since the previous year.
Here in London, we are currently undertaking Europe’s largest infrastructure project - Crossrail - which will provide even better transport links to the City.
We’ve taken the difficult but right decision to make our tax system more competitive - cutting corporation tax rates to 24% from this month to among the lowest in the developed world.
And we’re taking the controversial but necessary decision to reduce the top rate of income tax from next year.
Today’s event emphasises that we are not prepared to let anyone steal a march on us in terms of new products and new markets.
We are the natural home in the West for those who want to invest in the Chinese economic success story.
The increasing international use of RMB is an important development for China and for the World Economy.
The growth of the Chinese economy has been quite remarkable.
We all know the statistics.
China has experienced growth of around 10% a year for the last 30 years.
In a generation, China’s middle class is forecast to be over three times the size of that of the whole of Western Europe combined.
And it is the strength of Asia’s economy which means that despite turbulent times for the world economy, global growth in this decade and the next will be higher than the past 30 years.
But this growth has so far not been matched by the increase in the international use of its currency, so it is clear that the substantial expansion of RMB will be one of the major developments in global markets in the coming decades.
Extension of the market to the Western time zone is a crucial part of its expansion.
It is the ambition of the British Government to make London a Western hub for the sector - with all the benefits that this will bring to our own economy.
And what’s so special about today is that not only does it mark the launch of the first RMB bond outside of outside mainland China and Hong Kong.
Today, we also mark the official launch of the City of London initiative on London as a centre for RMB business.
I want to thank Stuart Fraser, and the City of London Corporation Steering Committee and Expert Advisory Group for their hard work and leadership in getting to this point today.
The involvement of companies like Bank of China, Barclays, Deutsche Bank, HSBC and Standard Chartered will provide the depth of experience on technical, infrastructure and regulatory issues that are needed to develop the market.
Its first output - the Bourse Consult’s report into London’s capabilities as an offshore RMB centre - is a demonstration of this expertise, providing a clear direction for the market’s future development.
It’s taken a lot of hard work from people in this room.
But today is not the end of the process; it’s the beginning.
I hope that other major European banks and corporate will follow today’s lead, and that we will see Chinese institutions and corporations issuing RMB bonds in the London market in the very near future.
In the coming decades, it is China that will act as one of the great powerhouses of the world economy.
By acting as a bridge between East and West, we can secure London’s position as the leading financial centre in the years to come - securing growth and prosperity for Britain.