There are two major implications of China’s decision to allocate 80 billion yuan (US$13.1 billion) in quotas to Britain under the renminbi qualified foreign institutional investor (RQFII) scheme, and Britain’s plan to lower entry barriers for Chinese banks to set up branches. The gestures reflect warmer political ties between the two nations after British Prime Minister David Cameron’s meeting with the Dalai Lama sent a chill through relations last year. On the financial front, it is clear China is ramping up efforts to internationalize the renminbi by using Europe, its second-biggest trading partner, as a key platform. It was only last week that the European Central Bank and its Chinese counterpart signed a 350 billion yuan currency swap deal. London and other European Union nations are racing to become offshore yuan hubs, and closer links between Beijing and London will give the British capital an advantage over rivals such as Frankfurt.
Vietnam Ties: China is pushing for better maritime, onshore and financial cooperation with Vietnam as Asia’s biggest economy seeks out more friends in the Asia-Pacific to counter US efforts to regain influence in the region. During his visit to the Southeast Asian nation on Tuesday, Premier Li Keqiang laid out a four-point plan to deepen business links between the two countries. The most significant is the proposal to more than double bilateral trade to US$100 billion by 2017, compared with US$41 billion last year. More moves are expected in this direction, including expansion of a bilateral currency swap deal and local currency settlement.
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