CNY payments in London may become fact soon

The Chinese authorities want a new offshore, CNY payment banking hub in London on the blueprint set for Hong Kong offshore CNY payment hub where Bank of China is in business. The move will expand the Chinese currencys footprint to the European market as a result of the fact that more than 80% of CNY trade settlement transactions are made in Hong Kong only.

Now, the discussions between the two parties swirl around the appointment of a CNY clearing bank in London, admitting Londons role as the Western centre of offshore CNY trading as George Osbourne, Britain’s finance minister, has stated.

Presently, London relies mostly on Hong Kongs offshore CNY infrastructure for accession to CNY liquidity and clearing service.

All other offshore centers have Chinese banks as clearing institutions, as follows: Singapore has Industrial and Commercial Bank of China (ICBC) and both Taiwan and Hong Kong have the Bank of China as clearing institution. The UK agreed on a CNY 200 billion (USD 32.9 billion) three-year span mutual currency swap deal with China in 2013. Eventually, another transaction was granted a CNY 80 billion quota for a CNY investment model.

Average daily turnover of foreign exchange products, including spots, forwards, swaps and options in London climbed to USD 15.6 billion in the first half of 2013, more than doubling that of a year earlier, according to City of London. Chinas CNY has overtaken the SGD and HKD to become the 8th most used world payments currency, as well as the second in trade finance, global transaction services organization.