London - The UK’s pending agreement to appoint a clearing bank for transactions in Chinese yuan would be a boon for businesses because it stimulated trade between the two countries, the City of London Corporation said yesterday.
“This simply gives it another push,” Mark Boleat, the policy chairman at the local government body that runs London’s financial district, said in an interview.
“Because we are dealing with China, which is still a highly regulated economy, the designation of a clearing bank is politically significant,” Boleat said.
China Construction Bank’s branch in London said yesterday that it would sign an agreement tomorrow to facilitate offshore yuan clearing in London.
It will be one of a number of deals announced during Chinese Premier Li Keqiang’s visit to the UK this week, including a $20 billion (R214.4bn) agreement for BP to supply liquefied natural gas to China National Offshore Oil.
The clearing bank would facilitate the use of the yuan by banks and other companies conducting international transactions, the Bank of England said in March.
Prime Minister David Cameron, who met China’s President Xi Jinping in the Netherlands in March, is looking to boost trade with emerging market economies and to build on London’s capacity as an international financial centre.
More than 60 percent of yuan payments outside China were made in London, the UK Treasury said in March, citing data from the Society for Worldwide Interbank Financial Telecommunication.
Last June, the Bank of England became the first central bank in Europe to establish a currency swop facility with the People’s Bank of China, supporting yuan traders by providing funding when needed.
London is competing with other European cities to lure Chinese investment by becoming centres for the yuan. Germany’s Bundesbank agreed in March to work with the Chinese central bank on the clearing and settlement of yuan payments, with Frankfurt becoming the euro area’s centre for renminbi trade. – Bloomberg