RMB transactions developing rapidly in London

Mark Boleat, policy director at the City of London Corporation. [Photo/Xinhua]

The growth of usage of Chinese currency renminbi in transactions carried out through London has been "very rapid" and has increased significantly over the past two years, a leading representative of Britain's financial services industry said.

Mark Boleat, policy director at the City of London Corporation, told Xinhua that the development of the renminbi market in London is now well under way.

"It has been growing very rapidly and that has continued throughout 2013," Boleat said. "It started from a low base but we have seen very big increases, and many businesses are now using Renminbi as a standard."

The development of a greater number of transactions has taken place over the past two years.

Boleat said, "This is an area where there is not one dramatic day; it is something that is changing over time."

"What has happened over the last two years is that this has become more widespread, so that businesses which would previously do everything in US dollars, at quite some cost to themselves,

are finding that their bank is offering them the facility to receive or to pay in Renminbi," he said.

He said the development benefits the corporates hugely. "They make one or two percent as a result of that and that can make a very big difference to the profitability of the transaction."

In October, the British agreed a deal with the Chinese to allow Chinese banks to open branches in London and to allow sterling to become only the fourth currency to trade directly against the Renminbi.

The first Chinese mainland bank to issue a bond in yuan in London was the Industrial and Commercial Bank of China, which did so in November 2013. The 2 billion yuan deal was oversubscribed.

Fees to businesses have reduced, compared to some years ago, a trend which Boleat says will continue.

"This will continue along with the growth in trade with China," he said.

Boleat forecasted the Britain-China bilateral trade to grow rapidly over the next 10 years.

"We expect that the financial reform in China will lead to greater integration between the financial markets in China and the rest of the world, particularly London," he said.

Boleat said reforms announced at the Third Plenum of the 18th Central Committee of the Communist Party of China were important for London as a financial center.

He said London expects more Chinese banks and institutions, as well as more Chinese investment, whether it is buying commercial property or investing in businesses like Thames Water and Heathrow Airport.

The announcement of the swap line between the People's Bank of China, or the Chinese central bank, and Britain's central bank Bank of England in 2013 was really important, said Boleat.

"In China it is very symbolic, showing the importance of London as an offshore center but it also gives reassurance, to the banks in particular, that if there is a shortage of liquidity then the central banks in either country will make up that liquidity," he said.

As the renminbi becomes more important, other markets will develop, but Boleat said London would aim to keep its paramountcy in Europe. "A lot of that business can be cleared through London," he said.