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The yuan is set to internationalize further, said City of London expert

June 15,2016

   
   

Recent weakening of the Chinese currency will not deter its internationalization as London is ready to handle greater volume of cross-border yuan businesses, a City of London official said on sidelines of the Lujiazui Forum.

“The yuan’s internationalization implies that the currency response to market movements, sometimes there will be up and sometimes there will be down,” said Mark Boleat, chairman of policy and resources committee of the City of London.

“This will not lead to reduction in the use of the yuan. Our main concern in developing the market has always been facilitating financing of trade, rather than long-term investments. What is needed there is simply liquidity of the market,” Boleat said.

Boleat, a main initiator since 2012 to build London as an offshore yuan center, said the initiative has been basically completed and London is well prepared to embrace more cross border activities such as issuance of yuan-denominated bond and a connect with the Shanghai Stock Exchange.

“We probably have done everything that needs to be done in terms of having the necessary market infrastructure. But there is still scope to significantly increase the volume of business, and that will happen as companies get used to dealing in the yuan,” said Boleat, “We’ve seen a number of the yuan bond issuance in London including a 3 billion yuan sovereign bond by the Chinese government last week. We expect to see much more activity without the need for new initiatives.”

Boleat will visit the Shanghai Stock Exchange and the Shanghai Clearing House to discuss development of setting up a Shanghai-London stock connect that will enable investors to trade shares in each other’s market.

In terms of foreign exchange issues, further arrangements need to be made in currency settlement across the two time zones, Boleat said.