Although there was a talk three years ago that the U.K.-China relations deteriorated after U.K. Prime Minister David Cameron met with the Dalai Lama, the exiled Tibetan leader, developments that take place today show it's not a problem anymore.
As London is hosting China's president Xi Jinping, a People’s Bank of China official told a British executive that the central bank already expects London to be the worldwide center for renminbi trading, Bloomberg has reported without naming the person.
The yuan wasn’t even allowed outside its own borders before 2004, but China is opening up now, driving predictions that it will become a reserve currency eventually rivaling the dollar. London already has 40 percent of global foreign-exchange trading and wants to build on its dominant position by grabbing a major share of offshore renminbi trading.
London’s dominance in foreign-exchange trading has been a widely-spread topic in the past week as bankers and politicians cite a statistic from TheCityUK, a financial services lobby group: London trades more dollars than New York, and more euros than all of Europe combined.
For the British capital-city, intensifying its renminbi trading could mean more financial services jobs and more investment. In the past 15 years, over $50 billion of Chinese cash has flowed into British assets, according to Standard Chartered estimates. The two countries agreed on 14 billion pounds ($22 billion) of trade deals during Chinese Premier Li Keqiang’s visit in 2014.
A research commissioned by Euronext NV expects as much as $5 trillion of Chinese money over the next three to five years to flow into assets on European exchanges.
Data supports the belief that London’s gravity is pulling in renminbi trading. Peak transactions in the offshore currency against the greenback occur at 7 a.m. London time, reflecting the handover from Asia when London forex traders are at their desks, ICAP Plc data shows.
In the past year, trading has more than doubled at that time on ICAP’s EBS Brokertec platform. The dollar-renminbi cross has surged to its third-most traded pair from 14th in 2013. Last year, the broker and market operator created a 24-hour, six-person team focusing on the Chinese currency.
In the past six months, offshore renminbi trading more than doubled on Thomson Reuters Corp. markets to $192.5 billion in September. This included spot and forwards transactions. That is up from $127.1 billion a year earlier and $28.2 billion in 2013.
