The agreement of a sterling/renminbi (RMB, or Chinese yuan) swap arrangement between the Bank of England (BoE) and the People's Bank of China (PBoC) is a very positive step that highlights the importance of the internationalisation of the RMB to London, Policy Chairman of the City of London Corporation Mark Boleat said on Sunday.
The agreement will give greater confidence to market participants, boost the already strong growth of London's RMB business volumes and support mutually beneficial trade and investment between our two countries, said Boleat.
Both countries' central banks have signed an agreement to establish a reciprocal 3-year sterling/renminbi currency swap line, with the maximum value of 200 billion Chinese yuan/20 billion pounds, according to an announcement on the BoE's website on Saturday night.
Boleat told Xinhua that the agreement gives confidence to the market for its official support and for the liquidity.
"What we've seen in the past two years is the massive increase in the use of RMB to finance the international trade, and that has always been our major priority. It is easier for businesses who trading with China if they can trade in RMB rather than converting it into dollar and then into sterling," Boleat said.
Import and export RMB financing totaled 33.6 billion yuan (5.4 billion U.S. dollars) last year, up by 100 percent compared with 2011, and the volume of Letters of Credit and other loan guarantees grew 13 times to 4.7 billion yuan, according to a report released by City of London earlier this month.
"The RMB has been already a very important currency, and since I was last time in China the year before, the trend towards internationalization has been accelerated. We expect the RMB to be traded in london as the other major currencies are in the future," Boleat said.
Referring to the RMB pool held in London, Boleat said the capital pool in London is still quite small, as the RMB deposit, investment and bond issuance has not grown as rapidly as the trade financing vehicles.
"But I am sure in longer term, we would see a much bigger pool of RMB held in london, we are going to see many more investments whether directly into china, or into fund dominated in RMB," added Boleat.