* Talks mark progress from early discussions last year
* ICBC, Bank of China usual suspects
* Move to put London in leading position in Europe
By Grace Li and Michelle Chen
HONG KONG, Feb 20 The British and Chinese
governments are in active discussions about setting up a
clearing bank in London for China's currency, a milestone that
will put the city in a leading position to offer yuan trade
business in Europe.
Taking a leaf out of Hong Kong's blueprint in being the
leading offshore yuan hub after the establishment of Bank of
China (Hong Kong) as a clearing bank, the authorities are
pressing ahead with having one for the city of London.
The move will help expand the Chinese currency's footprint
beyond Hong Kong, where more than 80 percent of yuan trade
settlement transactions are handled and foster greater
confidence among European companies to adopt the yuan, also
known as the renminbi, as a currency for trade.
"The UK and Chinese governments are in active discussions
now about the appointment of a RMB clearing bank in London,
recognising London's role as the Western centre of offshore RMB
trading," Britain's finance minister George Osborne said on
Thursday. He was speaking at the British Chamber of Commerce
All other offshore centers have Chinese banks as trade
clearing institutions; Singapore has Industrial and Commercial
Bank of China (ICBC) and Taiwan, Bank of China
, as clearing institutions.
A clearing bank is considered a politically sensitive
subject and is usually a homegrown entity with Bank of China and
ICBC being the leading contenders for this role, according to
At present, London mainly relies on Hong Kong's offshore
yuan infrastructure to obtain yuan liquidity and clearing
service, with Standard Chartered Bank tying up with
Agricultural Bank of China in December to provide yuan
clearing services there.
The yuan clearing bank set up in 2003 in the former British
colony has created a channel for cross-border renminbi
transactions through the banking system, and also laid a solid
foundation for the burgeoning development of yuan business.
As a result, trade settled in yuan exploded with 18 percent
of China's total global trade now settled in yuan compared with
2 percent in 2010.
Yuan deposits, including outstanding certificates of
deposits, was over 1 trillion yuan ($164.57 billion) in 2013,
more than triple that of 2010, data from the Hong Kong Monetary
Competition among potential offshore yuan centres, including
Taiwan, Singapore, London and Luxembourg, has intensified as
Beijing steps up efforts to promote the wider use of its
The first international RMB conference in London will be
hosted this summer, Osborne added.
The UK signed a 200 billion yuan ($32.9 billion) three-year
bilateral currency swap deal with China last year, becoming the
first G7 country with such a swap line. It was later granted an
80 billion yuan quota for a yuan investment scheme.
Average daily turnover of foreign exchange products,
including spots, forwards, swaps and options in London climbed
to $15.6 billion in the first half of 2013, more than doubling
that of a year earlier, according to City of London.
While London's position as the world's biggest foreign
exchange and bond trading centre gives it advantages, regional
rivals such as Luxembourg, Paris, Frankfurt and Switzerland,
also want a part of the growing yuan business.
China's yuan has overtaken the Singapore dollar and Hong
Kong dollar to become the 8th most used world payments currency,
as well as the second in trade finance, global transaction
services organisation SWIFT said.