London-Hong Kong Commodities Link Mooted as Xi Ushers in New Era

A London-Hong Kong Connect, proposing to link commodity market trading, is among one of the many pacts struck as Chinese President Xi Jinping visits Britain, marking a new era of expanding ties between the two economies.

The plan by Hong Kong Exchanges and Clearing Ltd. will connect its futures market to the London Metal Exchange, allowing participants on the Chinese exchange to buy and sell and clear trades on the world’s largest metal bourse. A non-binding agreement was signed Wednesday as part of cooperation initiatives announced in a ceremony led by Xi and British Prime Minister David Cameron.

The link would reduce costs for investors in China, the biggest commodity importer, to access the LME and better manage their trading risks, HKEx said in a statement.

Xi’s visit is the latest sign of warmer ties between the two nations. Xi on Tuesday singled out the U.K.’s place as the leading offshore yuan trading center outside Hong Kong and noted that the two countries are becoming “increasingly interdependent.

After the implementation of the London-Hong Kong Connect, HKEx said it plans to offer yuan-denominated futures and commodity products to help expand the use of China’s currency in international markets. The Hong Kong exchange bought LME for $2.2 billion in 2012.

The London-Hong Kong Connect plan is subject to regulatory approvals.

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