Britain has relaxed stringent rules for Chinese banks willing to set up in London. Beijing in turn opened up its markets to British-based investors, marking the latest move to establish the yuan as one of the world’s key currencies.
“A great nation like China should have a global currency,” said UK Chancellor of the Exchequer, George Osborne, during his official five day visit to China. And the UK is gladly willing to contribute “through the international center of finance: London”.
Under the agreed pilot program, China sanctioned London-based investors to buy up to 80 billion yuan ($13.1 billion) of stocks, bonds and money market instruments directly, avoiding Hong Kong transactions, Reuters reports.
Meanwhile, Britain will let Chinese banks set up wholesale branches in London, easing regulations the country had imposed after the financial crisis broke out. Since 2008, Britain has insisted that most foreign lenders should set up their UK operations as “subsidiaries” rather than branches, which provides greater protection for depositors and taxpayers. Less regulation will be welcomed by Chinese lenders who have always complained the rules made it hard to operate in Britain, prompting them to move much of their business to Luxembourg.
On top of that, London and Beijing will trade the yuan against the dollar directly, avoiding the dollar.
“The Chinese currency, the renminbi, is not terribly well known in Britain at the moment. But over my lifetime I think it’s going to become almost as familiar as the dollar, and I want British businesses involved in trading it, investing in it,” Osborne told BBC television in China.
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