HSBC has become the first UK bank to launch a full service Chinese renminbi (Rmb) service for UK businesses.

The service will let firms open a UK domiciled Rmb account for trade and payment operations with mainland China.

Specifically, the new services includes international Rmb business accounts domiciled in the UK, direct payment capability, full trade-related services and foreign exchange transacting and hedging.

China’s recent deregulation of its currency has allowed a number of international banks the chance to offer Rmb services.

According to the China-Britain Business Council, UK exports to China were up by 44% year-on-year to the end of August to reach £4.5bn (US$7.3bn).

However, a small proportion of UK exporters are currently using Rmb as a trade settlement currency.

“Demand is small but growing and part of the reason for this is that contracts are often only negotiated on an annual basis,” Ian Tandy, HSBC’s head of trade and supply chain UK, tells GTR.

“Therefore, discussions between UK business and their business partners in China around payments and terms are not held frequently.

“We believe the Renminbi is likely to become a major trading currency over the next five years, with the currency on course to be a top-three international currency by 2015.”

HSBC’s chief economist Stephen King has said that the Rmb could even challenge the US dollar for global reserve currency status.

But HSBC are not the only bank to see the potential in offering Rmb-denominated products, and the bank is most notably in competition with Standard Chartered and Deutsche Bank when it comes to new Rmb product offerings.

“There is a high level of competition across the banking industry and the development of new currency services is no different,” Tandy says.

“As you can see, the competition is, and will remain, intense.”