It’s been three years since China became the world’s second largest economy, behind the United States. Despite having this economic powerhouse status, China’s currency is not yet in the equivalent ranks of the ‘majors’ or most actively traded currencies. But, perhaps we are getting closer. Some recent changes certainly point to this.
Just two months ago, the UK chancellor George Osborne and China Vice Premier Kai Ma signed a landmark agreement which will potentially create Europe’s first RMB offshore market in London, worth RMB 80 billion (or about US $13 billion). This is on top of the RMB 144.6 billion (US$ 23.7 billion) that China has already designated for foreign investment. I should note that other centres, including Paris and Frankfurt, are also vying to create such hubs in Europe as well. These would effectively create the first offshore RMB market(s) outside of Asia, following the creation of RMB offshore centres in Singapore and Hong Kong. The Financial Times recently cited estimates from HSBC that HK accounts for $12-13 billion each day, doubling the amount traded last year. (more…)