Brexit could dull London’s sheen as offshore yuan centre

London could lose its sheen as an offshore yuan centre if Britain decides to exit the European Union later this week, with a sizable chunk of the existing Chinese currency deals moving to other European cities and Hong Kong, analysts said.

It would also be a severe dent to London’s standing as a global financial centre considering that it is the world’s second largest offshore yuan centre after Hong Kong. London also has the largest pool of yuan deposits in Europe and has hosted several yuan bond floats, including last month’s 3 billion yuan (HK$3.6 billion) sovereign bond issue of the Ministry of Finance.

In addition, its gateway position in Europe makes it an ideal city for the offshore trading of the Chinese currency. Yuan bonds issued in London are easily tradable within Europe, said analysts. But if Britain decides to exit the EU, then these bonds would face European banking, fund transfer and talent recruitment restrictions.

Brett McGonegal, chairman and chief executive of Capital Link International, a financial advisory firm, said the Brexit could have devastating effects on the UK economy and the pound.

“It (Brexit) will have a profound impact on London and its standing as a leading centre for overseas yuan transactions and products,” he said.