LONDON Nov 12 Britain is considering setting up
a London-based clearing bank for the offshore yuan market to
improve liquidity, a government minister said on Tuesday.
Finance minister George Osborne has been leading a drive to
develop London as an offshore trading centre for the yuan, and
last month eased the rules for Chinese banks to set up in
The Bank of England and China's central bank also signed a
yuan swap line earlier this year to make it easier for traders
in London to access the yuan, or renminbi, currency.
But the offshore yuan bond market has been slow to develop
in London, while clearing of yuan foreign exchange transactions
takes place only via Hong Kong.
"We will work together to keep (the market) liquid,
including through appropriate settlement and clearing
arrangements such as a London clearing bank," Sajid Javid,
financial secretary to the UK Treasury, told a conference on the
Chinese banks are likely to compete for the role of
London-based clearing bank.
"Should London decide to pursue a local infrastructure
arrangement, Chinese banks have a great advantage in providing
clearing services ... and more liquidity support in London,"
Wenjian Fang, CEO of Bank of China (UK), told the conference.
The yuan has increased rapidly as an international currency
following relaxation by the Chinese authorities, and is now the
12th most used payment currency in the world, according to data
from financial services provider SWIFT.
But the scope for further development is huge, given only 13
percent of China's trade with the rest of the world is currently
settled in yuan.
China's carefully managed programmed for foreign investors
(RQFII) is also being expanded beyond Hong Kong, giving
London-based investors the right to buy up to 80 billion yuan
($13.1 billion) of stocks, bonds and money market instruments.
Javid, who is in charge of relations with the financial
service industry, said he hoped the first RQFII license to a UK
entity would be awarded before the end of the year.