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The City of London Corp. Wednesday formed a working group with five leading banks as well as U.K. Treasury, the Bank of England and the Financial Services Authority to support growth of yuan business in the city.
Already the world's biggest currency trading center, accounting for about one-third of global flows, London is competing against Singapore, Tokyo and a handful of other financial capitals to capture increasing demand for the yuan. The move comes just a few days after the Chinese government decided to loosen some restrictions on trading of the currency.
Bank of China Ltd. (3988.HK, 601988.SH, BACHY), Barclays PLC (BARC.LN, BCS), Deutsche Bank AG (DB, DBK.XE), HSBC Holdings PLC (0005.HK, HBC, HSBA.LN) and Standard Chartered PLC (2888.HK SNTDF STAN.LN) are joining the City of London, the local-government authority.
"As the world's leading financial center, London is uniquely well placed to assist China in its goal of further expanding the international use of the RMB," said George Osborne, the U.K.'s Chancellor of the Exchequer, referring to the yuan, also known as the renminbi.
City of London said the initiative was launched to provide leadership to the wider financial markets on technical, infrastructure and regulatory issues, to advise the U.K. Treasury on maximizing London's capacity to trade, clear and settle yuan and to articulate practical next steps and long-term aims for the further development of the market in London.
London's bid comes as HSBC is considering issuing its first international yuan-denominated bond, or so-called dim sum bond, to attract more interest from European investors, according a report in The Wall Street Journal. Other U.K. banks also are hoping to become leaders in the dim sum bond market in London given the dim sum bond market tripled in size last year to $16.8 billion, according to Hong Kong Monetary Authority.
In addition to the working group, London also published a report quantifying the city's current capabilities as an offshore center for yuan business, providing a baseline for the future growth of the market.
China's efforts to turn the yuan into an international currency have accelerated in recent months. Saturday, the government said it would allow the yuan to trade in a wider range. However, foreign ownership of the yuan isn't yet fully liberalized, and Hong Kong is the only legal offshore trading center.
The report into London's current capability as an offshore yuan center found London already is an expanding center for yuan business, especially for corporate clients. London's share of spot Chinese yuan trading represents 26% of the global offshore spot yuan foreign-exchange market, with an estimated $680 million traded through London on average every day.
In comparison, $2.7 billion in spot Chinese yuan is traded through Hong Kong a day.
-By Jessica Mead, Dow Jones Newswires; +44 (0) 20 7842 9256; firstname.lastname@example.org
-By Matthew Walter, Dow Jones Newswires; 212-416-2910; email@example.com