PBoC approves HSBC and Standard Chartered as market-makers in GBP/RMB

Chinese premier Li Keqiang expects renmninbi trading in London to eventually outpace volumes in mainland China, just as London trades more dollars than New York and more euros than Europe, he told participants at a high-level financial forum in London, following an agreement to directly trade sterling against the RMB.

His comments came after the People’s Bank of China (PBoC) and the UK launched GBP/RMB trading without a dollar leg, which will encourage the development of the direct exchange rate.

The pound becomes the fifth major currency to trade directly against the renminbi (RMB), after the US dollar, Japanese yen, Australian dollar and New Zealand dollar.

On June 18, the PBoC also approved UK banks HSBC and Standard Chartered Bank as market-makers for direct trading in GBP/RMB in interbank markets, while China Construction Bank became the first RMB clearing bank in London. Meanwhile, UK Chancellor George Osborne announced an RMB export guarantee for British businesses.

The announcements were made at the UK-China Financial Forum in London, where Osborne and the Chinese premier welcomed the closer ties between their countries.

“I believe the emergence of China’s currency as one of the world’s leading currencies will be the next huge change. [Put] bluntly, I want the City to facilitate that change and be central to it. In 2011, there was almost no offshore renminbi activity in London. Now we account for two-thirds of Renminbi trading outside China and Hong Kong… Last year, with the permission of the Chinese government, we saw the first Chinese bank do the same, and now, Chinese banks will soon be able to apply to set up wholesale buy lexapro australia branches here. It’s hugely important in underpinning the future growth of London’s RMB business,” the Chancellor said in his speech at the forum.

Market participants at the conference, some of which took place under Chatham House Rules, said they expect the global share of RMB payments to grow to 30%, from the current level of 3%, and the RMB to be structurally ready for liberalisation by 2017 – a year earlier than previously hoped.

Chinese authorities have also granted new licences to HSBC Asset Management and Blackrock’s UK subsidiary, allowing them to make RMB-denominated investments into China, while the UK government has agreed to provide export guarantees for RMB transactions.

This guarantee will be a boon for companies such as Airbus and Rolls-Royce in the first instance, as the launch will give them better access to China’s aerospace industry, estimated to be worth more than $600 billion over the next 20 years. The UK is currently China’s third-largest trading partner in the European Union.

“In London, China is seen as an opportunity, whereas in New York, China is seen as the new bad guy, and in Europe, the financial transaction tax will thwart the growth of the EUR/RMB market. So, I think London will emerge as the main trading hub for both GBP/RMB and USD/RMB,” says Jon Vollemaere, chief executive and founder of R5FX, an interbank trading platform for emerging market currencies.

GBP/RMB is now a quoted currency pair on the China Foreign Exchange Trade System. The UK is the world’s largest currency trading hub, capturing some 40% of the $5.3 trillion-a-day market.