Every yuan's a winner: Xi Jinping's UK visit boosts London's role in offshore yuan market, leverages expertise for internationalisation
President Xi Jinping's state visit to Britain is already showing signs of boosting financial cooperation between the two countries.
London hopes the visit can help it gain competitiveness over rivals such as Singapore and Luxemburg by boosting its role in the offshore yuan market, while China hopes to use Britain's financial expertise to push for the currency's internationalisation.
Central banks of the two countries yesterday renewed their currency swap agreement for another three years and extended the scale to 350 billion yuan/£35 billion (HK$426 billion) from the previous 200 billion yuan/£20 billion, to offer liquidity support for London's yuan market.
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"In recent years, cooperation between the UK and China in the financial services sector has been particularly strong and has benefitted greatly from government support on both sides. In particular, yuan internationalisation has been a significant component in developing this relationship and the City of London looks forward to strengthening this even further," said Mark Boleat, policy chairman for the City of London Corporation.
On Tuesday, the People's Bank of China issued its first offshore yuan-denominated bonds in London, setting the coupon at 3.1 per cent for the one-year papers. "This issuance by the PBOC will increase liquidity in London's yuan bond market, help to develop a pricing benchmark and in turn attract higher-rated issuances by other institutions. London will continue to support Chinese authorities to promote dialogue and market developments that bring mutual benefits to the UK and China's financial services," Boleat said.
Wen Bin, chief economist with China Minsheng Bank, said the yuan's internationalisation required "robust offshore markets", adding that China could "benefit from the UK's financial status, its financial infrastructure and market depth".