LONDON (Reuters) - Britain and China will sign an agreement next week to set up the first clearing service for renminbi trading outside Asia, putting London in a prime position to offer yuan trade business in Europe.
China has been a key focus of Chancellor George Osborne’s efforts to boost exports of financial services from Britain, which was the first Group of Seven country to agree a renminbi swap line with the People’s Bank of China last year.
Britain’s finance ministry said on Wednesday that the Bank of England and PBOC would sign an agreement on renminbi clearing and settlement next Monday, setting out how the two central banks will cooperate on setting up a clearing bank.
“Connecting Britain to the fastest growing parts of the world is central to our economic plan,” said Osborne in a statement. “Other Western countries will follow, but London now has the critical mass of infrastructure, helping to put Britain at the front of the global race.”
A finance ministry source said an announcement on the appointment of clearing banks was not expected next Monday.
A Bank of England spokesman said he had nothing further to add at present.
Prime Minister David Cameron and President Xi Jinping discussed cooperation between the two central banks at a meeting on the margins of a nuclear security summit in the Netherlands on Tuesday, Wednesday’s statement said.
Osborne said last month that the British and Chinese governments were in discussions about the appointment of a yuan clearing bank in London.
A clearing bank is considered a politically sensitive subject in China, and is usually a domestic entity, with Bank of China and ICBC seen as the leading contenders for this role, according to trade sources last month.
London is the world’s largest trade centre for foreign exchange, but it mainly relies on Hong Kong’s offshore yuan infrastructure to obtain yuan liquidity and clearing services.
In December, Standard Chartered Bank tied up with Agricultural Bank of China to provide yuan clearing services there.
The finance ministry said 62 per cent of yuan payments outside of China take place in London, citing data from the SWIFT global financial transactions network.
Average daily turnover of yuan-denominated foreign exchange products - including spots, forwards, swaps and options - in London climbed to $15.6 billion in the first half of 2013, more twice as much as a year earlier, according to the local authority for the City of London.
Editing by Catherine Evans