Presidential visit to Britain by Xi Jinping could help cement London as a Yuan trading center

Britain’s business-savvy Conservative government has demonstrated its acumen this week by inviting Chinese President Xi Jinping to meet senior British government officials and members of the Royal family in order to firm up Sino-British commercial partnerships to the tune of over £30 billion.

A very clever move indeed, as Britain still stands far ahead of its fellow European Union member states in terms of business, financial prowess, fintech and modernity, and could well find its exit strategy from the union of retrograde European nations with which it shares a common parliamentary oversight, and whose economies are floundering.

Aside from new Chinese investment in projects that range from renewable energy to electric public transport, Britain could well become a hub for interbank Yuan trading, which would be an advantageous byproduct of the commercial partnership between the two nations.

Anyone who has spent any time in China recently will have no doubt been astonished by not only the futuristic modernity of the entire nation, but by the sheer size of businesses offering financial services in China.  Last week, FinanceFeeds saw IBs in the country which manage several million dollars of client funds in FX trading accounts held with overseas FX dealers, some of which trade approximately 90,000 lots per month, and some of which consider their massive portfolio of FX investment to be just a small proportion of a business empire which incorporates property development and agricultural machinery manufacturing.

Bill sale to bring 3.1% yield

According to Bloomberg, the People’s Bank of China’s yuan bill sale resulted in European and North American investors buying almost 50% of the 5 billion yuan worth of one-year bills which were offered by the People’s Bank of China yesterday. The total sale yielded 3.1%.

In dollar terms, this equates to $788 million, marking out a distinct possibility that London could become an ideal location from which to trade the Chinese currency.

Instead of taking the usual anti-business stance that has come to be expected from the European elite these days where non-issues and barriers are often raised including ‘human rights’ or other rebellious protests, Britain has allowed itself to surge forward by welcoming a commercial partnership with China and concentrating on business and progress rather than politics and recalcitrance.

The difference being that China welcomes business and is an economic and commercial powerhouse with tremendous wealth and a population with extreme determination and business ability, whereas many European nations have spent the past twenty years backpedaling, being bailed out by the IMF, remaining old fashioned and the home of vast and unsustainable demographic problems such as youth unemployment and outmoded infrastructure across all sectors.

In terms of the participants in the bill sale, Bloomberg reported that Asian investors registered for 51% of the bills, with US and European investors taking 25% and 24% respectively. Banks accounted for 47% of the overall subscription, making them the biggest industry sector to participate.

Interestingly, money managers took 14%, showing a keen interest by FX fund managers in purchasing currency direct from the issuer.

Singaporean economist Tommy Xie from the Oversea-Chinese Banking Corporation stated

“This is another important step in yuan internationalization, which could help increase chances to win reserve status. For London, by playing an essential role in the process, the city enhances its role as the world’s currency trading center.”

London remains a shining light in Europe as it is the largest institutional trading center in the world, as well as being the largest financial center worldwide across all sectors.

It will be interesting to note whether the gulf between London’s ever-increasing strength and the remainder of ever declining Europe will widen even further.