The People’s Bank of China announced the appointment today in a statement on its website and China Construction Bank confirmed by e-mail it will sign the agreement tomorrow. Bank of China Ltd. is the clearing bank for the Chinese currency in Hong Kong, Macau and Taipei, while the mandate in Singapore went to Industrial & Commercial Bank of China Ltd.
The appointment will add weight to London’s bid as Europe’s offshore yuan hub amid competition from Frankfurt, Paris and Luxembourg. Premier Li and U.K. Premier Minister David Cameron held talks in London yesterday and pledged to cooperate to spur growth in their countries.
“It makes sense for China to allow more banks in yuan clearing as the global usage of the currency continues to expand,” said Hu Yifan, head of research at Haitong International Securities Group Ltd. in Hong Kong. “London is key in yuan internationalization given that the city has always been a hub for global foreign-exchange trading. The clearing agreement will also enable London to offer more yuan products.”
In October, China agreed to an 80 billion yuan ($12.8 billion) quota for financial institutions in London to invest offshore yuan in its domestic capital markets through the so-called Renminbi Qualified Institutional Investor program. The nations will also introduce direct trading between the yuan and the British pound.
The yuan ranked seventh as a global payments currency in April, according to Society for Worldwide Interbank Financial Telecommunications. Excluding China and Hong Kong, Singapore was in top position in yuan payments by value, followed by London, Swift data showed.
Shares of China Construction Bank climbed 0.4 percent to HK$5.81 as of 10:53 a.m. in Hong Kong. The stock has dropped 0.5 percent this year, while the city’s benchmark Hang Seng Index lost 0.4 percent.
To contact the reporter on this story: Fion Li in Hong Kong at firstname.lastname@example.org