George Osborne, the Chancellor, is set to turn London into a major international centre for trading China’s currency, the renminbi. What does this mean for the UK and for British entrepreneurs?
China already trades the renminbi through Hong Kong, but it would like to make its currency more global. The UK government hopes that London will complement Hong Kong to develop an offshore RMB market, and become the “home of British investment and Asian finance in Europe”.
“Not only does this create a fantastic opportunity for the City, which will benefit greatly in terms of kudos and from the vast flow of funds that this will inevitably bring, but it also places SMEs and UK corporates at a distinct advantage,” explains”Mark Thompson, head of corporate desk at foreign exchange provider Global Reach Partners.
“Access to a more liquid tradable market in renminbi and new yuan-denominated products, which should follow, will forge stronger links between the vast army of SMEs that export to or source goods from China and place these businesses at an advantage to their continental counterparts. SMEs will benefit from the ability to fix payments in CNY when buying Chinese goods a service that currently can only be sourced via specialised brokerage houses.”
The economic gains of being a top hub of renminbi trading are substantial, placing Britain in a strong position as China continues to liberalise. Britain is also the only European nation to be in such talks on developing a renminbi market a vote of confidence by China in London’s standing as a global financial centre.
“With consumer and government spending under such pressure, it is export and foreign direct investment that will drive GDP in the UK in the years to come,” adds Thompson.
“For SMEs, it is the BRIC and emerging economies where the greatest opportunities lie. The UK strategy for growth centres on SMEs’ ability to export. Having been in a fragile trade position for decades, exports are Britain’s best chance of regaining the GDP it has lost since the start of the financial crisis. Creating a yuan hub in London and bringing SMEs closer to the Chinese consumer is great news for British business.”?Buying goods from China to UK