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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: Box-By-The-Riviera™ who wrote (85949)	1/17/2012 12:05:04 AM
From: elmatador	Read Replies (1) \| Respond to of 218517

Osborne seizes chance to grab China’s coat tails London (as) leading offshore trading centre for the renminbi highlights the opportunity for Britain to prosper from China’s growing role in international currency markets Osborne seizes chance to grab China’s coat tails By Alice Ross, Robert Cookson and George Parker George Osborne’s push to make London a leading offshore trading centre for the renminbi highlights the opportunity for Britain to prosper from China’s growing role in international currency markets. For months, the government has been on the defensive over the City’s role as a global financial centre amid what David Cameron has described as a “constant attack” from new European Union regulations However, Mr Osborne’s efforts to bang the drum for London in Asia this week brought a reminder that the City’s future could be determined as much by its abiliy to tap into fast-growing emerging markets as anything that happens closer to home. Addressing the Asia Financial Forum in Hong Kong on Monday, the Chancellor said he wanted the UK to be “the home of Asian investment into Europe” and has signed a deal with the Chinese territory to explore closer currency links between the two regions. Yet, while cautiously welcoming the spirit of Mr Osborne’s comments, investment banks questioned the impact the talks would have – arguing there is a long way to go before trade in the renminbi will make a signficant contribution to their trading desks’ profitability. By supporting the City’s attempt to break into a potentially lucrative and growing market – in the long term at least – Mr Osborne is reminding Michel Barnier, EU internal market commissioner, of the role London has as a financial services entrepot for the whole EU single market. London is already the global hub of foreign exchange trading, with a 37 per cent slice of the $4tn that is traded every day in the largest financial market in the world. The City’s geographical position makes it ideal for trading a market that never closes, enabling traders to price currencies across all major time zones. No other European country comes close – Switzerland is the nearest rival with 5 per cent. Even the US has only an 18 per cent share. Trading the dollar against other currencies is currently the most lucrative activity for foreign exchange traders in London. The US currency accounts for 85 per cent of daily trading across the globe. According to the latest figures from April 2010, the renminbi makes up less than 1 per cent. Yet China has been taking steps towards loosening its strict capital controls on money going in and out of the country and allowing the renminbi to trade more freely. In July 2010, it introduced the offshore renminbi on the Hong Kong market – a shadow version of the onshore currency. Trade in the offshore renminbi has since boomed. In fact, banks including Deutsche Bank, Citi and HSBC already have renminbi traders sitting at the heart of their dealing floors in London. “We quote many prices already against the renminbi in London,” said David Bloom, currency analyst at HSBC. “So as far as the traders are concerned we are already trading it Some question how far any deal between the UK and China to open this trade further will affect their business – though they say the establishment of a clearing bank in the City would help. The main obstacle to the renminbi becoming big business for the Square Mile is the simple fact that the Chinese currency is not freely convertible. As long as this is the case, no financial centre – be it London, New York or Frankfurt – can become a hub for renminbi trading in any meaningful sense. China’s offshore currency is a shadow of its onshore holdings. While the total amount of renminbi deposits in Hong Kong doubled last year to Rmb630bn ($100bn), it still represents less than 1 per cent of the deposit base on the Chinese mainland. When London emerged as the global hub for trading US dollars in the 1960s, American companies such as General Electric could move dollars to and from the UK as they pleased – and borrow there freely too. By contrast, Chinese companies cannot invest overseas or borrow abroad without regulatory approval from Beijing, which is rarely granted. Were China to relax its currency controls, the renminbi could begin to rival the dollar and the euro as one of the world’s reserve currencies. “When China does become fully convertible then absolutely yes, the growth in renminbi will take off - but when that happens is anyone’s guess,” says Paul Bakunowicz, director in Asia foreign exchange trading at Citi. Additional reporting by Paul J Davies in Hong Kong