Jakarta Globe – Bloomberg, Henry Sanderson, October 15, 2013
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| The yuan has become the ninth most-actively traded in the world, up from 17th in 2010, according to a September report by the Bank for International Settlements. (Bloomberg Photo) |
China and
the UK will introduce direct trading between the yuan and the British pound,
helping London steal a march on Frankfurt and Paris to become Europe’s hub for
the Chinese currency.
The two
nations also agreed on an 80 billion yuan ($13 billion) quota for financial
institutions in London to invest in China’s domestic securities under the
Renminbi Qualified Foreign Institutional Investor program, UK Chancellor of the
Exchequer George Osborne said at a briefing in Beijing today, after meeting
Chinese Vice Premier Ma Kai. Osborne said the countries will ensure access to
yuan liquidity through additional settlement and clearing agreements in London.
“My
ambition is to make sure London is the western hub for yuan business,” Osborne
said, adding that the city would work in partnership with Hong Kong. Talks will
begin to enable Chinese banks to establish wholesale branches in the UK for the
first time, allowing them to scale-up their business activies, he added.
The Bank of
England was the first in a race among European central banks to establish a
currency-swap facility with China when it agreed on a line of 200 billion yuan
in June. The European Central Bank signed a 350 billion yuan swap line this
month. Hong Kong was the first to host a yuan clearing bank and currently has
the largest offshore pool of deposits denominated in the currency.
The yuan
has become the ninth most-actively traded in the world, up from 17th in 2010,
according to a September report by the Bank for International Settlements. It
was also the 12th most-used for global payments in August, according to an
estimate this month by Belgium-based financial services firm Society for
Worldwide Interbank Financial Telecommunications.
Investment
Quotas
China is
seeking a greater role for the yuan in global trade and investment and is
opening up its domestic capital markets under the RQFII and Qualified Foreign
Institutional Investor programs to achieve that goal. RQFII enables offshore
yuan to be invested in China, while QFII quotas allow foreign-currency
investments.
The
nation’s 25.4 trillion yuan onshore bond market offers greater choice, better
liquidity and higher yields than are available in Hong Kong, where there is 253
billion yuan of Dim Sum debt outstanding, according to Bank of China data.
Ten-year government bonds yielded 4.07 percent yesterday in Shanghai, compared
with 3.67 percent in Hong Kong.
“We want
the quota to be used as quickly as possible but licenses have to be issued,”
Osborne said, referring to London’s allocation, which is the first outside of
Greater China.
Direct
Trading
The pound
will be the fourth major currency to have direct trading links with the yuan,
after the greenback, Japan’s yen and Australia’s dollar. Trading between the
Australian and Chinese currencies started in April, while yuan-yen trades began
in June 2012. Osborne didn’t give a timeframe for pound-yuan trading to
commence.
The daily
value of yuan trading in London now stands at around $5 billion a day, double
the daily volume of some $2.5 billion in 2012, Osborne said, citing data by
HSBC.
China
pegged its currency to the US dollar until 2005, and now trades in a managed
range against a basket of major currencies, with different rates inside and
outside of China. Yuan trade settlement started in Hong Kong in 2009 with four
cities in China. The program was extended nationwide last year.
HSBC
forecast in March that the currency will be fully convertible within five years
and a third of China’s total trade will be settled in yuan by 2015, making it one
of the top three global trade settlement currencies by volume.
Bloomberg
China and Brazil in $30bn currency swap agreement
China and Japan will start direct currency trading
"The U in Kundalini"- Oct 18, 2012 (Kryon channeled by Lee Carroll) - (Subjects: Kundalini, Unification, EU, Nobel Peace Prize 2012, Middle East, South America, Only 5 Currencies on Earth, Old Souls, Duality will dismiss, 3D Humanity will melt with Multi dimensional higher self, Global Unity… etc.)
China and Japan will start direct currency trading
"The U in Kundalini"- Oct 18, 2012 (Kryon channeled by Lee Carroll) - (Subjects: Kundalini, Unification, EU, Nobel Peace Prize 2012, Middle East, South America, Only 5 Currencies on Earth, Old Souls, Duality will dismiss, 3D Humanity will melt with Multi dimensional higher self, Global Unity… etc.)
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