British and Hong Kong leaders unveiled steps on Monday aimed at developing London into an international trading center for China's currency.
British Treasury chief George Osborne said in Hong Kong that his trip to Asia this week, which also includes stops in Beijing and Tokyo, furthers dialogue with Chinese authorities and Chinese and British banks "on establishing London as a new hub for the renminbi market as a complement to Hong Kong."
The Hong Kong Monetary Authority and the UK Treasury said a new private sector forum will work on tightening cooperation between Hong Kong and London, particularly on settlement systems, market liquidity and the development of renminbi financial products.
European and Chinese banks including HSBC Plc, Standard Chartered Plc, Bank of China Ltd., Deutsche Bank AG and Barclays Plc will take part in the forum, which will meet twice a year starting in May.
Osborne said he welcomed a recent announcement by the Hong Kong Monetary Authority to extend operating hours of its renminbi payments system that would make it easier for payments to be settled in London.
The moves follow an agreement in September by British and Chinese officials to back London's development as a renminbi trading hub.
Beijing is promoting the international use of the renminbi, also known as the yuan. It's also promoting Hong Kong, a semiautonomous Chinese territory with its own financial system and currency, as an offshore trading center for the yuan.
Last year, yuan-denominated bank deposits in Hong Kong doubled to 630 billion renminbi ($100 billion) as savers sought higher returns from the yuan, which has been strengthening 4-5 percent a year.
A market for yuan-denominated bonds has sprung up in Hong Kong, with foreign issuers including McDonald's, Caterpillar and the Asian Development Bank.
Beijing would like to see the currency become an alternative to the dollar, although tight capital controls limit its circulation overseas.
"It's clear that there's scope for substantial expansion of the renminbi market in coming years," said Osborne, who was speaking at a financial conference.
He said that in June 2011, China's share of world trade was 11 percent but the yuan's share of global foreign exchange trading last year was only 0.9 percent.
China has begun allowing companies to use yuan to settle international transactions. It has also signed currency swap deals recently with Pakistan, Thailand, South Korea and some other countries. Such deals would reduce costs for Chinese traders and might also increase the appeal of Chinese goods for foreign buyers with yuan to spend.
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