China’s second-biggest lender China Construction Bank has been chosen to be the first clearing bank for the yuan in London.
The move is expected to help cement London’s reputation as the international hub of foreign exchange trading. Other international financial centres across the world have been rushing to clinch a deal to host the renminbi clearing houses.
It is widely expected that the issue will be discussed when China’s Prime Minister Li Keqiang visits Britain next week for a yearly gathering and also as a reciprocation to UK’s Prime Minister David Cameron’s visit to China in 2013.
Most people had expected the Bank of China to be selected to offer the yuan’s clearing services over CCB, reported the Financial Times, though the decision was made in China rather in London.
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When contacted over the issue, the Treasury refused to provide any comment.
China and Britain inked the deal to set up the clearing house in May, a few days after Germany entered into a similar agreement. U.K. is trying to increase its exports to China, including its financial services.
So far, Hong Kong is the biggest offshore yuan trading centre, based on PwC data. Moreover, yuan deposits held in Macau, Taiwan and Singapore are much smaller than those in London, Paris or Luxembourg. New York has much smaller deposits than Europe. UK expects that the London clearing bank will work alongside the Hong Kong’s clearing infrastructure in order to facilitate funds transfer in the western hemisphere. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
To contact the reporter of this story; Yashu Gola at yashu@forexminute.com
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