London’s Infrastructure Needs as a RMB Offshore Center
New white paper explores UK ambition to become Western hub
Since the financial crisis of 2008/09, increasing concerns about the weakened US economy have caused the Chinese government to prioritise Renminbi (RMB) internationalisation as a key step in its economic reform. In June 2012, China’s State Council declared that the country will speed up the opening of its financial market, including allowing qualified foreign institutions to invest in China with the yuan, and expanding the use of the yuan in overseas markets, such as cross-border settlement and as an international reserve currency.
At the City of London RMB initiative launch event in April this year, UK Chancellor Osborne stated that it is "the ambition of the British Government to make London a Western hub" for offshore RMB trading. London’s status as the next major RMB offshore centre seems logical – London is well positioned with its existing infrastructure, banking community and regulatory framework. However, there are still challenges to be addressed if London is to achieve this aspiration.
Our new white paper discusses the various infrastructural developments that London will need to embrace in order to become a major RMB offshore centre. London’s key challenges in accumulating RMB liquidity, adopting a clearing and settlement system, and developing RMB investment options are driven by the natural evolution of the market, but to a certain degree could be accelerated by government regulation and policies.
As market participants, the financial services sector could contribute to London’s development through talent development, market awareness education, a greater variety of financial products and service offerings and industry-level collaboration.
Thomson Reuters is in a unique position to help build London’s RMB offshore capability thanks to our well established presence and deep understanding of the Chinese market, and our comprehensive suite of products and services, available in both English and Chinese. Further, we are an active contributing force to Hong Kong and its government authorities, while Hong Kong continues to develop as the first RMB offshore center. Our history in Hong Kong provides valuable experience toward assisting London’s own development.