The rumours are that the City could soon become an offshore centre for trading RMB – which would mean more jobs, talent and business for our city
You heard it here first – well, second, technically. BBC business editor Robert Peston has suggested it’s very likely China will make the City of London an offshore centre for trading Chinese currency, renminbi (RMB). London would join Hong Kong exclusively in this position.
If the City of London did become a Chinese currency trading hub, we could expect a substantial bolstering in financial jobs and potential billions in extra business. It would help reaffirm London’s status as a heavyweight global financial hub.
Western financial activity would gravitate towards the City again to get in on a slice of the RMB pie.
Peston points out that the move “would be some comfort to international bankers based in London, many of whom were alarmed that the UK’s position in the single market – which they say is the main reason they work in the City – could be put at risk by David Cameron’s recent decision to veto amendments to the European Union’s treaty.”
He also notes, though, that his sources believe the currency trading agreement “could only be reached if the Treasury had persuaded China that the UK’s commitment to the European single market, and its influence over it, had not been significantly weakened”.
For the record, London has been beavering away at this for some time. Back in September 2011, the FT was informed by government sources that China was for the first time giving “formal backing to moves by British banks to turn the City of London into an offshore trading centre for the renminbi”.
And if the deal does come off, it would be great for London’s financial future. Peston reports that one of his sources says new job positions would be created “almost overnight” as new teams are brought in to trade RMB.
Interestingly, we have heard from sources working very closely with high-powered Chinese businesspeople and officials that the Chinese government has been studying the British legal system very closely for some time now.
In part, this is to adopt best practices from a judicial ecosystem they presumably see as very effective. But, in the light of Peston’s report, we wonder if it might not also be to do with a move towards bringing our countries that bit closer, in trading terms at least.
For what it’s worth, LondonlovesBusiness.com would welcome RMB trading in the City with open arms. More jobs, and a reinvigorated reason for (perhaps currently unsure) financial institutions and talent to do proper business here again – what’s not to like?
Plus, it would help chivvy along trade between the UK and China. China might have a global reputation for being the don of exports, but the UK is in fact the seventh largest exporter in the world.
The EU still buys around 40-50 per cent of our exports, but that figure is shrinking. And we now sell more to China than to Italy, and the same as to Spain. Opening up London to RMB trading can only help lubricate the trade channel between us and China – which is essential for our economic future (China being, you know, rather economically impressive at the moment and all).
The move might also attract a new wave of talented Chinese financial and business brains to London, ready to straddle the RMB and western currency trades that would take place here.
That new wave of Chinese high-earners would sit nicely with the currently rapacious Chinese appetite for London’s luxury property and high-end brands. Ultimately, the possible influx of rich Chinese smartypants would bolster London’s talent pool and bring more wealth to the city, giving a nice array of boosts to our city’s economy.
So fingers crossed, eh!