The UK has overtaken Singapore to be the second-largest offshore renminbi (Rmb) clearing hub in the world.
Data from Swift’s Rmb tracker shows that Rmb payments’ value rose by 21% in the two years to March 2016. This takes the UK ahead of the city-state and behind only Hong Kong in the offshore clearing stakes.
However, the UK’s stake is still relatively small: Hong Kong accounts for 72.5% of all offshore Rmb payments, with the UK on 6.3% and Singapore on 4.6%. The news will be a boost to the UK government though, which has been making a concerted effort to foster greater economic ties with China.
In June 2014, China Construction Bank opened a clearing office in London, which is home to the largest forex market in the world. At the time, the City of London was competing with Frankfurt to become the first European clearing centre and while it narrowly lost out, it appears to have left the German city in its tracks in terms of volumes.
Swift’s UK, Ireland and Nordics managing director Stephen Gilderdale says: “Offshore Rmb clearing centres are driving greater use of the currency in global trade, and countries such as the United Kingdom are reaping the benefits.”
Last year, the UK became a founding member of the Asian Infrastructure Investment Bank (AIIB), China’s new development bank. It recently hosted Chinese President Xi Jinping and is a destination for billions of dollars of Chinese investment every year.
HSBC’s regional head of payments for Europe Eddie Norton says the news is a direct result of the government’s courting of China.
“The UK’s rise to become the largest offshore Rmb hub outside Hong Kong reflects the importance that European companies are placing on their commercial relationships in China,” he says.
Norton adds: “The opening of a clearing centre two years ago has helped the UK to build up Rmb liquidity, and progressive businesses are capitalising on London’s enhanced payments infrastructure to connect with partners overseas.
“As other regional cities such as Frankfurt and Paris strive to increase their Rmb business, the outlook for European trade and investment flows with China looks increasingly bright.”