June 19 - An Anglo-Chinese deal to create London's first renminbi clearing bank may have been agreed. But does it mean China's currency is any closer to rivalling the dollar as a world reserve currency? David Pollard reports.
The prize, potentially, is huge. London is in a race for a share of a Chinese securities market worth trillions. And, in Europe at least, it appears to be winning. Thanks to deals to cement its place as the leading trading centre for Chinese currency outside Asia. China's premier has been in London. Agreements were signed off for a Chinese clearing bank there - and the yuan's first direct trading with sterling. UK finance minister, George Osborne, compared the yuan - or renminbi as it's also known - to the dollar after World War Two - when it emerged as a leading reserve currency. SOUNDBITE (English) GEORGE OSBORNE, UK FINANCE MINISTER, SAYING: ''I believe that the emergence of China's currency as one of the world's leading currencies will be the next huge change in global finance.'' Simon Smith, Head of Research, FxPro. SOUNDBITE (English) SIMON SMITH, HEAD OF RESEARCH, FXPRO, SAYING: ''London is naturally the capital of foreign exchange trading. Around 40 per cent happens in the UK. So, as the renminbi slowly gains traction in the global economy, he wants to be part of that so he sees naturally political capital from doing so.'' China wants the yuan to be international and fully convertible with other major currencies. Figures suggest less than 20 per cent of Chinese trade is conducted in the yuan at present - transactions difficult for foreign companies. SOUNDBITE (English) SIMON SMITH, HEAD OF RESEARCH, FXPRO, SAYING: ''The idea is to make trade and trading easier with China. China's naturally been very slow to free up the convertibility of their currency. They want to have ultimate control of it and giving that away to the sort of, let's say, the free market is not necessarily something that they're comfortable with. They realise it has to happen if China is to become a global player.'' London is still dwarfed by Asian centres like Hong Kong when it comes to yuan deposits. And lags behind European rival Luxembourg in creating a yuan bond market. It's estimated the yuan is used in around nine per cent of trade finance. A long way behind the dollar's 80 per cent. SOUNDBITE (English) SIMON SMITH, HEAD OF RESEARCH, FXPRO, SAYING: ''The renminbi's rise will happen, but it's going to be very, very creeping. You're talking about decades more rather than years.'' In the shorter term, though, sentiment has improved. The latest Reuters poll on Asian currencies shows investors' first bullish bets on the yuan in four months.