OFFSHORE renminbi (RMB) – or dim sum bonds, as they have affectionately come to be known in the West – have more in common with their culinary counterparts than meets the eye.
Traditionally enjoyed at yum cha – the Chinese equivalent of afternoon tea – by farmers after a hard day’s work, dim sum have a long genesis, and require time and careful preparation.
This will be the case with developing London’s share of RMB business – such as dim sum bonds. While undertaking a 10 day business mission to China this week, I hope to engage with business leaders and ministers to develop the RMB on the global stage.
Launched in April this year, the City of London RMB initiative seeks to stimulate and sate the appetite for RMB transactions and financial services in London. By uniting participants from a range of leading global banks with observers from the UK authorities, we hope to tackle technical and regulatory issues surrounding the development of London’s RMB market, while developing the City as the Western hub for RMB.
Over the last couple of years, the growth of offshore Hong Kong RMB deposits has been impressive, moving from nearly nothing to 9.5 per cent of total banking deposits. Take-up of dim sum bonds has been equally impressive, with companies such as HSBC sampling this new delicacy in London this year.
As a new dawn of global trade starts to rise in the East, it is only natural that trade with emerging market countries in the region should be conducted in the currency of Asia’s largest trading nation.
This appetite for RMB outside of mainland China is an important development. In a recent survey by The Banker of 200 European corporates and investors, conducted in partnership with the City of London Corporation, 99 per cent of respondents expected that the yuan would become an important currency for global business within the next 10 to 15 years. But more must be done if use of the RMB is to match the size of the Chinese economy.
A liquidity pool is developing in London, as demand for the currency sees banks developing RMB products here. At present London has RMB deposits in excess of ¥109bn – with deposits for personal and corporate customers totalling ¥35bn.
London is already well-placed to become the major RMB centre in Europe. In addition to the range of products and services on offer in both retail and corporate banking services, spot RMB forex trading is estimated to account for 26 per cent of the global offshore RMB spot market.
London’s growth as a centre for RMB business is just beginning, as is China’s gradual liberalisation of its currency and financial markets. This is a long-term process and I hope that my visit to China will enable our countries to work more closely together on this exciting development.
David Wootton is lord mayor of the City of London.