As the chancellor noted in his recent Mansion House speech, the capital has held a strong and growing position in renminbi trading since the City of London initiative was set up in 2012. Indeed, London now accounts for two thirds of all renminbi payments outside of China and Hong Kong.
The new development will build on this progress by ensuring London has its own clearing and settlement facility. This is good news for London, as it consolidates the capital’s role as the Chinese currency’s Western hub. But it is also good news for the renminbi: it is already the seventh most traded currency in the world, and a London clearing bank will help make trading both more liquid and efficient, as well as complementing the main clearing and settlement infrastructure in Hong Kong with easier fund transfers in the Western timezone.
And as London’s renminbi market grows, more countries are recognising the currency’s potential. Other financial centres such as Frankfurt, Paris and Luxembourg have begun making overtures to China to set up offshore renminbi centres, strengthening economic ties. Of course, we will all compete for business. But it is important that the key European financial centres work together on this. We must incorporate each city’s specialist capabilities in order to capitalise on the opportunities of the renminbi to benefit all centres. And the potential for growing interconnectedness to enhance mutual economic benefits is immense.
As this cluster develops, London’s role as Europe’s key financial centre will be enhanced, as long as it stays firmly in the game. This is one of the reasons I am visiting China at the end of the month: to ensure that London’s role in the offshore renminbi market continues to grow, and that the City remains the partner of choice for our Chinese counterparts.
As the focus shifts towards developing renminbi-denominated products for investors, our role will be crucial. And with the momentum of two years of the City of London’s renminbi initiative behind us, London’s position as the premier Western offshore renminbi centre looks assured.
All in all, this is a major milestone in the City’s relationship with the world’s second largest economy. And this is highlighted by the visit of Chinese Premier Li Keqiang to London this week, following on from Prime Minister David Cameron’s visit to China last year.
The visit highlights both countries’ desire for a strong and stable long-term relationship, benefiting both economies. In line with the visit, the City will play host to a forum, in which many senior government officials and business leaders will discuss the ways we can collaborate to cultivate new business opportunities as the internationalisation of the renminbi continues.
Together, we are working to ensure that we maximise our economic opportunities.
Mark Boleat is policy chairman at the City of London Corporation.