As the government rightly recognises, the UK and London need to be plugged into fast-growing global markets like China in order to succeed in the global race. It is therefore positive that, alongside strengthening political ties, these visits actually served to make some tangible steps forward on key business issues.
The requirement for Chinese banks to operate as subsidiaries in the UK, rather than as branches, has been an area of concern for some time, and came up again during my visit to Shanghai and Beijing earlier this year.
Therefore last week’s announcement that the Prudential Regulation Authority will begin discussions with Chinese banks in London to enable them, for the first time, to apply to establish wholesale branches in the UK was encouraging. Of course, the devil will be in the detail of any agreement, and there will need to be appropriate safeguards in place to address any broader systemic implications. But regardless, it sends a positive signal that the UK welcomes Chinese and other foreign financial institutions.
Separately, there was an agreement to allow direct renminbi-sterling trading in Shanghai and offshore, making the pound the fourth currency to trade directly against the renminbi. This – together with new investment quotas – will help to cement London’s position as a global hub for Chinese currency, and boost the renminbi’s wider international use for trade.
London is the world’s leading centre for foreign exchange – accounting for almost 40 per cent of global turnover, more than New York and Tokyo combined – due to strengths including our timezone, a strong regulatory and legal framework, and international expertise.
It makes sense that we build on these existing strengths to ensure that the renminbi plays an increasing part in that mix in the future, as the currency gradually internationalises. The City Corporation has been working with policymakers and the private sector for some time to address the technical, infrastructure and regulatory issues affecting market development, so we welcome these recent developments.
Improving the rules around business visas is another strongly positive development for the City’s relationship with China. For too long, complaints have been raised that the visa process has been unnecessarily complicated and slow – resulting in Paris attracting far more visitors than London. We must not throw away the business, cultural and retail advantages that we have to offer, particularly for business visitors.
The government’s commitment to strengthening ties with China is to be welcomed. In an increasingly globalised world, London’s international reach is an asset that can deliver local benefits in both countries. A continuation of this approach will show investors around the world that Britain truly is open for business.
Mark Boleat is policy chairman at the City of London Corporation.