Financial cooperation leads relations

Premier Li Keqiang chats with British Prime Minister David Cameron before their meeting at 10 Downing Street on Tuesday. CHINA NEWA SERVICE

Premier underscores importance of ties between nations, telling British officials, 'We have much to offer each other'

Premier Li Keqiang urged Britain to seize momentum to consolidate its place as one of the most important offshore yuan markets outside Asia.  [Special coverage]

"China is an emerging major financial country and its financial development and reform is underway, while the UK, as a well-established financial power, has very open and vast and time-honored financial markets and institutions," Li said at the China-UK Financial Forum in London on Wednesday.

"We have much to offer each other," Li said.

British Chancellor George Osborne, who appeared alongside Li, said the increasing importance of the yuan could lead to a historic shake-up of the global financial system, and he wants the UK to play a central role.

"I believe the emergence of China's currency as one of the world's leading currencies will be the next huge change (to the financial world)," Osborne said.

The forum, held during Li's visit to Britain, heralds direct trading between the British and Chinese currencies for the first time.

China's central bank said on Wednesday that the Chinese currency will be traded directly against sterling in the interbank foreign exchange market.

It is the latest step to facilitate investment and bilateral trade between China and Britain.

"The move will help lower foreign exchange conversion costs and will promote use of both the yuan and pound in bilateral trade and investment, which will help strengthen financial ties between the two countries," the central bank said in a statement.

The British pound will become the fifth major currency that can be traded directly with yuan in Shanghai, joining Australian and New Zealand dollars, Japanese yen and the US dollar.

Li underlined the importance of financial cooperation between the two countries during his visit.

Li hailed a deal that makes China Construction Bank the first clearing-service provider for offshore trading of yuan in London.

"It will further consolidate and promote London's status as an international financial hub and will help the gradual internationalization of RMB to promote trade and investment liberalization and facilitation," Li said in a speech to business delegates on Tuesday night.

Industry insiders say that together with the direct trade of the yuan and pound, financial cooperation between China and the UK will further boost internationalization of RMB, and will add weight to London's bid to become the yuan's European offshore hub amid competition from Frankfurt, Paris and Luxembourg.

"In London, the world's biggest foreign exchange trading center, the RMB trading volume has taken up two-thirds of the global market exclusive of the Chinese mainland and Hong Kong," said Tian Guoli, chairman of Bank of China.

Bank of China signed an agreement with the London Stock Exchange on Tuesday to develop offshore trading in the Chinese currency.

Mark Boleat, policy chairman at the City of London Corp, said he warmly welcomes the forum with offshore yuan business as one of the major topics.

It "recognizes London's role as a leading Western center for offshore yuan business and highlights the active engagement between UK and Chinese policymakers and businesses on ways to develop new areas of collaboration, trade and business partnerships", Boleat said.

Also on Tuesday, Li joined British Prime Minister David Cameron at Downing Street for talks with international financial leaders in a bid to promote global free trade.

The talks, which were chaired by Osborne, the British chancellor of the exchequer, were attended by Christine Lagarde, managing director of the International Monetary Fund; Jim Yong Kim, president of the World Bank; and Angel Gurria, head of the OECD.

The participants also represent leading developed and emerging economies and their major currencies, including the yuan, British pound, US dollar and euro.