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China, Uk Deal Pushes London As Next Offshore Yuan Centre After Hk

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Reuters 15/10/13

'(Reuters) - China will give London-based investors the right to buy up to 80 billion yuan (8.2 billion pounds) worth of mainland stocks, bonds and money market instruments, boosting the city's efforts to be the next offshore yuan trading centre after Hong Kong.

The agreement, announced by Britain and China in a joint statement on Tuesday, falls under the Renminbi Qualified Foreign Institutional Investor plan, or the RQFII.

This is the first time the RQFII has expanded outside Hong Kong to give investors more avenues to invest yuan and more incentives to hold the currency - an outcome desired by China which wants to turn the renminbi into a widely-traded currency some day.

In return for the RQFII, the British government agreed to start talks to allow Chinese banks to set up wholesale branches in the United Kingdom, the two governments said, reducing regulatory hurdles for Chinese banks expanding in Britain.

"The renminbi will now have a firmer footprint in the European market," ANZ analysts said in a note.

"With the increasing presence of Chinese banks in London, the granting of the RQFII license will strengthen and widen the platform for London to develop the offshore RMB (renminbi) bond market."

Frances Cheung, a strategist at Credit Agricole CIB in Hong Kong said the amount granted under RQFII was substantial, underlining London as an important partner when it comes to RMB liberalisation.

"This, together with FX swap arrangement in Europe shows that China is trying to reach more parts of the world," Cheung said.

China last week also signed a 350 billion yuan swap agreement with the European Central Bank in the second-largest of such deals to date.

Under Tuesday's agreement, London and Beijing will also allow the yuan to be traded against sterling directly, as opposed to going through the dollar, thereby markedly reducing transaction costs.

A handful of countries including Singapore, Frankfurt, Taiwan and Kenya are vying for Beijing's approval to be a designated centre for clearing yuan trades outside of China in the hope of offering what may be a lucrative financial service. But Chinese analysts have said London is a natural choice given it is as a major centre for global currency trades.

Started in 2011 as a way of enticing investors to hold the yuan, the RQFII now has a global quota of 350 billion yuan, of which 134 billion yuan is utilised.

"Today we agreed the next big step in making London a major global centre for trading and now investing the Chinese currency," said UK Chancellor George Osborne, who is in Beijing.

Tuesday's agreement comes after Britain and China agreed to set up a currency swap line of up to 200 billion yuan in July in a move aimed at boosting trade and financial stability.

Trades in the yuan have ballooned in London, with import and export financing doubling to 33.6 billion pounds ($53.8 billion) from 2011.

Data from financial services provider SWIFT shows London accounts for 62 percent of yuan trades outside China and Hong Kong.'

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Is this the bit where we find out Dave, Gidiot and Boris and the Bulligdon Club alumni are in fact a Chinese Communist Party sleeper cell?

We're all Chinese now comrades!

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Is this the bit where we find out Dave, Gidiot and Boris and the Bulligdon Club alumni are in fact a Chinese Communist Party sleeper cell?

We're all Chinese now comrades!

The Oxford 3.....

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Is this the bit where we find out Dave, Gidiot and Boris and the Bulligdon Club alumni are in fact a Chinese Communist Party sleeper cell?

We're all Chinese now comrades!

We're definitely being softened up for the whole Chinese thing. The British state broadcaster is banging on about it. Expect some tv programs in the near future.

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Certainly interesting times for the US money printers.

Agreed

I did wonder what the Yanks reaction would be to such an announcement

The UK and its banking system is very much in their sphere of influence

If I was Osborne I would avoid making any journeys on my own by car or flying by light aircraft in the near future

Expect further revelations about Miss Whiplash, Class A drugs and Georgie boys youthful indiscretions to appear soon in a media outlet near you soon.

BTW George remember the Yanks can sink sterling anytime they want as they proved at Suez.

Edited by stormymonday_2011

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It would be great if the US fell out with the UK. I don't think the special brown envelopes understanding has been so great since Blair left office. It seems to been running on good will and momentum since then, bit like the UK economy.

The US does seem to be being backed into a corner at the minuite which is worrying as you know what a dog does when it is trapped.

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80 billion yuan is a trivial amount in bankster terms, isn't it?

Why would this bother the Yanks?

It's the precedent it sets and the intention that it alludes to.

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80 billion yuan is a trivial amount in bankster terms, isn't it?

Why would this bother the Yanks?

Indeed, it is trivial in bankster terms but you then have to ask yourself why did the US invade Iraq ?

It did not need its oil as it obtains most of its supply outside the Middle East

The invasion was driven by geopolitical as much as economic goals.

The UK and the CIty of London has pretty much been a US client state since World War 2

The stakes are pretty clear

http://www.dailymail.co.uk/news/article-2458273/China-advising-world-Americanise-threat-US-default-looms.html

Attempts by the British establishment to cosy up the Chinese who are ultimately the US geopolitical rivals may not be a risk free strategy as Osborne may find out.

The one place you don't want to be in the world is a location where the super powers compete for influence and fight out their differences.

Sady the current UK government are too full of dumb f*cks like Cameron and Osborne to realise that fact

Edited by stormymonday_2011

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AFP/Yahoo 16/10/13

'A US debt default could spur China to diversify its multi-trillion-dollar foreign exchange reserves, the world's largest, analysts say, as Beijing seeks to boost its voice in the global economy.'

Edited by Sancho Panza

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The Chinese are borrowing their way to prosperity just like everybody else.

IMF estimates the true fiscal deficit is nearly 10% of GDP, second only the lunatic Japanese.

http://www.telegraph.co.uk/finance/china-business/10380937/Chinas-soaring-fiscal-deficit-rings-alarm-bells.html

Borrowing by all levels of the Chinese government has soared to unprecedented levels and is now one of the highest in the world, vastly complicating efforts by Beijing’s new leadership to keep growth on track.

Data from the International Monetary Fund shows that China’s budget deficit reached 9.7pc of GDP last year if regional spending is included and one-off land sales are stripped out. This is higher than previously thought and above levels in the US, India, or Southern Europe’s debt-stricken crisis states.

Zhiwei Zhang from Nomura said it is disturbing that “massive stimulus” on this scale has not stopped China’s growth rate has slowing sharply since 2010, describing the latest rebound has “unhealthy” and likely to wither over coming months as Beijing is forced to tighten policy. “The economic recovery is unsustainable,” he said.

Analysts have long assumed that China’s authorities retain plenty of fiscal firepower if needed to keep the expansion going as they clamp down on dangerous levels of credit, but Beijing may already have exhausted any further scope for budget stimulus. Fitch Ratings warns that the pace of loan growth over the last five years takes China into uncharted waters, with debt jumping from $9 trillion to $23 trillion, or 200pc of GDP. The economic “efficiency” of debt has collapsed. Each extra yuan of debt now yields just 0.18 yuan of GDP growth.

nomura-defiucit_2703101c.jpg

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The Chinese are borrowing their way to prosperity just like everybody else.

IMF estimates the true fiscal deficit is nearly 10% of GDP, second only the lunatic Japanese.

Perfect business partners for UK PLC and the City of London as we have so much in common

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According to the BBC radio yesterday the Chinese want to make their currency a reserve currency just like the US dollar and this agreement with the UK will help them to do that.

So according to the BBC it must be possible to have 2 reserve currencies (at least 2?) :unsure:

At any rate they were also going on about how it would be so good for the UK banking sector and how it would help UK banks to achieve stuff like world domination - that'll be when they're not bust and bankrupt.

Apparently it's being finalised during Osborne's trip to China. Maybe they also agreed to help fund the unpopular Help to Buy scheme. If the Chinese put their spare money from US debt into London property then the sky will be the limit for prices (and MPs taxpayer funded property portfolios).

Edited by billybong

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From the OP reuters' link:

CityUK, which promotes the UK financial services sector, welcomed the move, which it said could increase funding for British infrastructure projects and investment in other sectors. housing.

Corrected.

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