Out-Law News | 16 Sep 2014 | 10:43 am | 1 min. read
The bond is intended to be a one-off issuance and the proceeds will be used to finance the UK government's reserves of foreign currency, the UK Treasury said. The announcement emerged as part of the sixth UK-China economic summit in London last week and reflects the RMB's increasingly important role as a global currency, as well as the growing economic bonds between the UK and China, the UK Treasury said.
"Our long term economic plan is working, but the job isn't done," said George Osborne, the UK's chancellor of the exchequer. "We need to export to fast-growing economies like China, and attract more investment to our shores. To do that, we need to make sure China's currency is used and traded here, as that will be not only good for China, but good for British jobs and investment too."
The size of the bond will be confirmed at the time of issuance, but the UK Treasury said that it would be large enough to be given 'benchmark' status. The bond will be used to add RMB to UK foreign currency reserves, which currently consist of US dollars, euros, Japanese yen and Canadian dollars.
The UK is already the fastest growing market in Europe for RMB payments, more than doubling volumes in the year to July 2014. In 2013, RMB foreign exchange trading in London averaged $25.3 billion per day, which was a 50% increase from 2012.
China Development Bank (CDB) also announced the successful issuance of its own RMB-denominated bond in London as part of the summit; the first by a quasi-sovereign outside of Greater China. The state-backed bank also intends to open a representative office in London, its first in Europe, Osborne said.
Alongside the summit, Industrial and Commercial Bank of China (ICBC) was approved for a wholesale branch licence by the UK's Prudential Regulation Authority (PRA). Although the licence will not allow ICBC to take deposits from retail customers, the world's biggest bank will become the first Chinese bank to open a UK branch in over 50 years. China has also granted Lloyd's of London a licence to open a Beijing branch, allowing it to upgrade its existing representative office and do more business in China's main insurance hub.
The UK will also be included as a destination for investment as part of China's upcoming RMB-qualified domestic institutional investor programme, allowing institutional investors in China to invest into financial markets in the UK and for RMB funds to flow from China to the UK. The summit also included discussions on infrastructure, trade and tourism.