U.K. Chancellor of the Exchequer George Osborne called on London to expand its role as an offshore trading center for the Chinese yuan as Europe’s deepening debt crisis prompts Britain to seek new growth markets.
“Our objective is simple: we want to expand the amount of business and trade we do with each other so that the citizens of China, Hong Kong and Britain all benefit from the prosperity and jobs that will bring,” Osborne said, according to remarks released by his office in London as he began a three-day trip to Asia that will include stops in Hong Kong, Beijing and Tokyo.
Closer financial links with the world’s fastest-growing economy may help buffer Britain’s economy against turmoil in Europe, where nine countries were downgraded. Osborne is relying on trade to boost an economy with record levels of consumer and public debt and an austerity program that is sapping consumer confidence and exacerbating unemployment.
The U.K. Treasury and Hong Kong Monetary Authority will facilitate a forum for banks to increase cooperation on the offshore yuan business, they said in statements today.
Osborne said he wants to build links with Hong Kong, which acts as a gateway to China’s currency for foreign investors. The former British colony was designated as China’s major offshore yuan trading hub under China’s latest five-year plan.
The forum, which will meet twice a year, plans to look at clearing and settlement systems, market liquidity and the development of new yuan products, according to the statement from the Hong Kong Monetary Authority. HSBC Holdings Plc, Standard Chartered Plc and Bank of China Ltd. and other banks will join.
Hong Kong authorities plan to lengthen yuan payments trading by five hours by June, allowing London-based institutions the opportunity to expand their 30 percent share of trading outside the Chinese mainland. The yuan is a denomination of the renminbi.
“London now has a unique opportunity,” Peter Sands, chief executive officer at Standard Chartered, said in the Treasury press release. HSBC Chief Executive Officer Stuart Gulliver also said in the statement that London can become the “premier offshore trading center for the renminbi.”
Yuan-denominated deposits in Hong Kong expanded to 627 billion yuan ($99 billion) in November from 64 billion yuan in January 2010, according to Hong Kong Monetary Authority.
Separately, Deputy Prime Minister Nick Clegg will call for an expansion of employee-owned companies by making tax and regulation more favorable for such companies. Clegg said he will also consider giving workers powers to request a change in ownership in the company they work for.
“Firms that have engaged employees, who own a chunk of their company are just as dynamic, just as savvy as their competitors,” Clegg will say in speech in London today. “In fact they often perform better.”