Lightningbolt
BANNED
- Joined
- Aug 15, 2013
- Messages
- 755
- Reaction score
- 0
China and the U.K. will introduce direct trading between the yuan and the British pound, helping London steal a march on Frankfurt and Paris to become Europes hub for the Chinese currency.
An 80 billion yuan ($13 billion) quota for financial institutions in London to invest in Chinas domestic securities under the Renminbi Qualified Foreign Institutional Investor program was also approved, U.K. Chancellor of the Exchequer George Osborne said at a briefing in Beijing today, after meeting Chinese Vice Premier Ma Kai. Further agreements on yuan settlement and clearing are planned, he said.
My ambition is to make sure London is the western hub for yuan business, Osborne said. More trade and more investment means more business and more jobs for Britain.
The Bank of England was the first among European central banks to establish a currency-swap facility with China when it agreed on a line of 200 billion yuan in June. The European Central Bank signed a 350 billion yuan swap line this month. Hong Kong was the first to host a yuan clearing bank and currently has the largest offshore pool of deposits denominated in the currency, which climbed to a 20-year high today.
China, the worlds second-largest economy, is seeking a greater role for the yuan in global trade and investment. The pound will be the fourth major currency to have direct trading links with the yuan, after the greenback, Japans yen and Australias dollar. Trading between the Australian and Chinese currencies started in April, while yuan-yen trades began in June 2012. Osborne didnt give a timeframe for pound-yuan trading to commence.
Major Currency
The deal with the U.K. is an important gesture showing the yuan has become a major currency, said Nathan Chow, a Hong Kong-based economist at DBS Group Holdings Ltd. Practically, direct trading will save transaction costs and eliminate fluctuations stemming from changes in the dollar. It also signals further expansion of yuan usage in Europe, through empowering London with more yuan capability.
The daily value of yuan trading in London now stands at around $5 billion a day, double the daily volume of some $2.5 billion in 2012, Osborne said, citing data by HSBC Holdings Plc. HSBC forecast in March that the currency will be fully convertible within five years and a third of Chinas total trade will be settled in yuan by 2015, making it one of the top three global trade settlement currencies by volume.
Yuan Investment
Yuan investment activity is low in London partly because regulations favor investment services offered from Hong Kong, the City of London Corporation, which oversees the U.K.s main financial district, said in an e-mailed statement on June 12. Granting RQFII quotas specifically to London institutions would help boost volumes, it said.
Chinas currency has become the ninth most-actively traded in the world, up from 17th in 2010, according to a September report by the Bank for International Settlements. It was also the 12th most-used for global payments in August, according to an estimate this month by Belgium-based financial services firm Society for Worldwide Interbank Financial Telecommunications.
Talks will begin to enable Chinese banks to establish wholesale branches in the U.K. for the first time, allowing them to scale-up their business activities, Osborne said. China agreed to support the development of London as an offshore center for yuan debt issuance, he added.
European Hub
Its another step in securing Londons position as a European hub for yuan trading, Mark Williams, chief Asia economist at Capital Economics Ltd., said by phone from London. London already had a big head start in that competition because its already the global currency trading hub.
The yuan has strengthened 36 percent against the dollar and 47 percent versus the pound since a peg to the U.S. currency was scrapped in July 2005, according to data compiled by Bloomberg. It has advanced 2.1 percent this year versus the greenback, making it the sole gainer among Asias 11 most-used currencies, and touched 6.1007 per dollar today in Shanghai, the strongest since the government unified official and market exchange rates at the end of 1993.
The Peoples Bank of China announces several daily reference rates for the yuan and the allowed trading range is 1 percent on either side of the fixing against the dollar. For the British pound, the yen and the Hong Kong dollar, the limit is 3 percent and its 5 percent against the Malaysian ringgit and the Russian ruble. The yuan was fixed at 9.8063 per pound today.
Opening Markets
China is opening up its domestic capital markets under the RQFII and Qualified Foreign Institutional Investor programs as it promotes usage of its currency worldwide. RQFII enables offshore yuan to be invested in China, while QFII quotas allow dollars to be used for investments in the local currency.
The nations 25.4 trillion yuan onshore bond market offers greater choice, better liquidity and higher yields than are available in Hong Kong, where there is 253 billion yuan of Dim Sum debt outstanding, according to Bank of China data. Ten-year government bonds yielded 4.07 percent yesterday in Shanghai, compared with 3.67 percent in Hong Kong.
We want the quota to be used as quickly as possible but licenses have to be issued, Osborne said, referring to Londons RQFII allocation, which is the first in Europe.
Osborne Wins Yuan Deal Giving Boost to London Over Frankfurt - Bloomberg
An 80 billion yuan ($13 billion) quota for financial institutions in London to invest in Chinas domestic securities under the Renminbi Qualified Foreign Institutional Investor program was also approved, U.K. Chancellor of the Exchequer George Osborne said at a briefing in Beijing today, after meeting Chinese Vice Premier Ma Kai. Further agreements on yuan settlement and clearing are planned, he said.
My ambition is to make sure London is the western hub for yuan business, Osborne said. More trade and more investment means more business and more jobs for Britain.
The Bank of England was the first among European central banks to establish a currency-swap facility with China when it agreed on a line of 200 billion yuan in June. The European Central Bank signed a 350 billion yuan swap line this month. Hong Kong was the first to host a yuan clearing bank and currently has the largest offshore pool of deposits denominated in the currency, which climbed to a 20-year high today.
China, the worlds second-largest economy, is seeking a greater role for the yuan in global trade and investment. The pound will be the fourth major currency to have direct trading links with the yuan, after the greenback, Japans yen and Australias dollar. Trading between the Australian and Chinese currencies started in April, while yuan-yen trades began in June 2012. Osborne didnt give a timeframe for pound-yuan trading to commence.
Major Currency
The deal with the U.K. is an important gesture showing the yuan has become a major currency, said Nathan Chow, a Hong Kong-based economist at DBS Group Holdings Ltd. Practically, direct trading will save transaction costs and eliminate fluctuations stemming from changes in the dollar. It also signals further expansion of yuan usage in Europe, through empowering London with more yuan capability.
The daily value of yuan trading in London now stands at around $5 billion a day, double the daily volume of some $2.5 billion in 2012, Osborne said, citing data by HSBC Holdings Plc. HSBC forecast in March that the currency will be fully convertible within five years and a third of Chinas total trade will be settled in yuan by 2015, making it one of the top three global trade settlement currencies by volume.
Yuan Investment
Yuan investment activity is low in London partly because regulations favor investment services offered from Hong Kong, the City of London Corporation, which oversees the U.K.s main financial district, said in an e-mailed statement on June 12. Granting RQFII quotas specifically to London institutions would help boost volumes, it said.
Chinas currency has become the ninth most-actively traded in the world, up from 17th in 2010, according to a September report by the Bank for International Settlements. It was also the 12th most-used for global payments in August, according to an estimate this month by Belgium-based financial services firm Society for Worldwide Interbank Financial Telecommunications.
Talks will begin to enable Chinese banks to establish wholesale branches in the U.K. for the first time, allowing them to scale-up their business activities, Osborne said. China agreed to support the development of London as an offshore center for yuan debt issuance, he added.
European Hub
Its another step in securing Londons position as a European hub for yuan trading, Mark Williams, chief Asia economist at Capital Economics Ltd., said by phone from London. London already had a big head start in that competition because its already the global currency trading hub.
The yuan has strengthened 36 percent against the dollar and 47 percent versus the pound since a peg to the U.S. currency was scrapped in July 2005, according to data compiled by Bloomberg. It has advanced 2.1 percent this year versus the greenback, making it the sole gainer among Asias 11 most-used currencies, and touched 6.1007 per dollar today in Shanghai, the strongest since the government unified official and market exchange rates at the end of 1993.
The Peoples Bank of China announces several daily reference rates for the yuan and the allowed trading range is 1 percent on either side of the fixing against the dollar. For the British pound, the yen and the Hong Kong dollar, the limit is 3 percent and its 5 percent against the Malaysian ringgit and the Russian ruble. The yuan was fixed at 9.8063 per pound today.
Opening Markets
China is opening up its domestic capital markets under the RQFII and Qualified Foreign Institutional Investor programs as it promotes usage of its currency worldwide. RQFII enables offshore yuan to be invested in China, while QFII quotas allow dollars to be used for investments in the local currency.
The nations 25.4 trillion yuan onshore bond market offers greater choice, better liquidity and higher yields than are available in Hong Kong, where there is 253 billion yuan of Dim Sum debt outstanding, according to Bank of China data. Ten-year government bonds yielded 4.07 percent yesterday in Shanghai, compared with 3.67 percent in Hong Kong.
We want the quota to be used as quickly as possible but licenses have to be issued, Osborne said, referring to Londons RQFII allocation, which is the first in Europe.
Osborne Wins Yuan Deal Giving Boost to London Over Frankfurt - Bloomberg
