Yuan business booms abroad

Authorities in London announced Wednesday that the city saw "significant" growth in local yuan business last year, remarks which come as several of the world's leading financial hubs work to strengthen their own markets for the currency.

According to a report released by the City of London Corporation, Britain's capital witnessed "strong growth" in use of the Chinese yuan by corporations and UK-based banks, as evidenced by the fact that local import and export financing with the currency reached 33.6 billion yuan ($5.4 billion) in 2012, a surge of 100 percent over the previous year. Meanwhile, loan guarantees priced in the yuan expanded 13-fold over the same period to reach 4.7 billion yuan.

"The development of London's renminbi market is exactly the sort of thing Britain should be doing to lead in the global race," George Osborne, Britain's Chancellor of the Exchequer, wrote in the report.

China's central bank has been promoting the internationalization of the yuan in recent years to minimize the influence of the US dollar on the value of its own currency.

In April Australian Prime Minister Julia Gillard announced that Australia would start direct trading of the yuan and the local dollar.

"Besides trade, the rising yuan against the US dollar has made it so appealing that many countries and areas are now looking into developing yuan business," Tan Yaling, head of the China Forex Investment Research Institute, told the Global Times Thursday.

So far, the yuan's central parity rate has strengthened 1,285 basis points this year, ahead of the 146 points last year.

"Compared with other currencies, such as the yen and the US dollar, the yuan's appreciation seems to make it a safe investment," Tan said.

Currently Hong Kong is the largest offshore yuan center. Its yuan deposits reached 677.2 billion yuan in April, up 1.4 percent from a month earlier, statistics from the Hong Kong Monetary Authority show.

Hong Kong is also facing stiff competition from London and Singapore for dominance in offshore yuan operations.

But Tan warned that the yuan is still not a freely convertible currency and China's economy is slowing down. "If the yuan one day starts depreciating, the impact will be catastrophic," he remarked.