London and Hong Kong can complement each other in offshore renminbi trade even after China Construction Bank becomes a clearing bank for the Chinese currency in Britain.
The decision to make China’s second largest lender as the first renminbi clearing bank in the United Kingdom was announced in the morning on Wednesday during Premier Li Keqiang’s visit to the country, according to a statement on the People’s Bank of China’s website.
The move is expected to further support London’s credentials as a global center for foreign exchange trading, some experts said. It is also essential for China to set up a renminbi clearing center in Europe to encourage enterprises in the region to settle their accounts using the Chinese currency.
There will be more clearing platforms in the future, the Hong Kong Economic Times reported Wednesday, citing Tommy Ong, executive director of treasury and markets at DBS Bank Hong Kong.
And as the RMB pool in offshore markets becomes bigger, Hong Kong will also benefit, Ong said.
London and Hong Kong can complement each other as London’s main clients are in Europe and the United States, while Hong Kong mainly serves Asian customers, the report said, citing Patrick Ho, economist and strategist (global markets) at the Hong Kong branch of Bank of Communications.
Hong Kong enjoys a geographical advantage as the Chinese currency is mainly used in Asia, particularly the Greater China region. It is beneficial for the city to reform the yuan business and set the standard for other offshore markets, Ho said.
As Hong Kong is a pioneer in renminbi trade and has the largest amounts of yuan reserves, yuan bonds and quotas under the Renminbi Qualified Foreign Institutional Investor (RQFII) scheme, the city’s competitive edge cannot be challenged by other offshore markets in the short term, the report said.
The “through-train” scheme that is set to link the stock markets of Hong Kong and Shanghai in October will strengthen Hong Kong’s status in renminbi trade, as foreign capital can be directly invested in A shares through securities firms in Hong Kong, it added.
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