London to become centre for trading in Chinese yuan - Action News
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London to become centre for trading in Chinese yuan

Beijing agreed Tuesday to make London a centre for handling investments denominated in yuan, making it the first financial centre outside of China to handle the tightly controlled currency.

China takes first steps to move currency onto world stage

Britain's chancellor of the exchequer George Osborne, left, and Chinese vice premier Ma Kai applaud as their officials shake hands after signing a deal Tuesday that will see London become a hub for trading in yuan. (Kota Endo/Associated Press)

Beijing agreed Tuesday to make London a centre for handling investments denominated in yuan, making it the first financial centre outside of China to handle the tightly controlled currency.

The announcement came Tuesday in the middle of a five-day British trade mission to China led by Chancellor of the ExchequerGeorge Osborne.

Beijing has ambitions to expand use of the yuan for trade and investment.

Londonis now ahead of any other financial centre in the race to become an important hub for yuan trading, after the Chinese central bank granted London-based institutional investors a quotaof 80 billion yuan ($12.7 billion) to invest in Chinese stocks.

China, which holds $1.3 trillion in U.S. treasury bills, is said to be deeply angered over the U.S. shutdown and threat of default.

China raises red flags over U.S. shutdown

Yesterday, Xinhua, China's official news agency advocated a "new world order" with reduced reliance on the American dollar and the U.S. economy.

"It is perhaps a good time for the befuddled world to start considering building a de-Americanised world," the Xinhua commentary said.

"Instead of honouring its duties as a responsible leading power, a self-serving Washington has abused its superpower status and introduced even more chaos into the world by shifting financial risks overseas, instigating regional tensions amid territorial disputes, and fighting unwarranted wars under the cover of outright lies."

The rhetoric may be a sign that Beijing is now confident enough to push the yuan as a trading currency and an alternative to the U.S. dollar. The currency is currently pegged to the U.S. dollar and cannot be directly exchanged formostother majorcurrencies.

Osborne said China's state-owned banks will beallowed to expand their operations in Britain by setting upwholesale branches.

Britain and China signed an agreement in June to have theircentral banks swap 200 billion yuan for 20 billion ($32 billion), giving U.K. financial institutions more access to large amounts of yuan than hadbeen available in the past outside of China.

Beijing courts European Central Bank to trade yuan

Osborne also said via his Twitter account that state-controlled Industrial & Commercial Bank of China Ltd. planned to issue a yuan-denominated bond in London, which would further encourage yuan use there.

Many international deals with China require a conversion to U.S. dollars and before London, onlyHongKong could handle such transactions.

Beijing is also courting the European Central Bank with an agreement this month to swap 350 billion yuan for 45 billion euros,suggesting Frankfurt maybe next in line to become a centre for investment inChina.

with files from the Associated Press