Sept. 16 – The United Kingdom and Chinese governments recently agreed to jointly work on developing products and services denominated in the Chinese local currency RMB, in a bid to develop the City of London into another major offshore RMB market.
In a statement issued after the fourth China-U.K. Economic and Financial Dialogue attended by Chinese Vice Premier Wang Qishan and U.K. Chancellor of the Exchequer George Osborne, the representatives said they welcome the private-sector-led development of London’s RMB market and agree to monitor and support the market, addressing any risks that may raise to harm financial stability.
“This dialogue will be supported by a joint collaboration project involving the private sector on the development of RMB-denominated financial products and services in London, including analysis of sources of demand and supply and potential areas for regulatory cooperation,” the statement said.
London has been competing with several other financial centers such as Singapore and Taipei to become an offshore market for RMB trading, and the agreement achieved this time has marked a head start for London, although for now the city may not rise to the status of Hong Kong – the only officially designated offshore RMB trading center.
While the Chinese central bank still has yet to set a clear timeline for the full liberalization of the RMB, it is looking to develop more offshore RMB trading centers and expand the use of RMB in international trade and financial transactions. China is making such efforts not only because of the surge in Chinese investments overseas, but also because of the government’s strategic need for reducing its dependence on the U.S. dollar and increasing the RMB’s global influence.
The United Kingdom and China are seeing closer trading and investment ties. Osborne said both countries were committed to reducing trade barriers and doubling bilateral trade to US$100 billion by 2015.
The United Kingdom also welcomes China’s investments into its infrastructure projects. Both the 2012 London Olympic site and the Atlantic Gateway in the north have already attracted Chinese interest, according to Osborne.
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